Why is Bitcoin a hedge against inflation for countries, specifically India?

Central banks of most countries in the world hold US T-Bills as reserve backing. Central banks of most nations including economic rivals of US like China and India holds T-Bills as asset in their books. Safe to say T-Bills is as pervasive as the air we breathe.

The United States of America announced strategic bitcoin reserves recently. Part of the reason is that the banks in US increased M1 money supply which have been used inefficiently by past government’s resulting in a huge debt that is rising every day (~$40 Trillion & more)

According to Michael Saylor, Strategic bitcoin reserve announced by president Trump has the potential to generate ~$16 trillion to ~81 trillion in wealth to the US treasury, offering a logical way to pay off its debt. How does this wealth gets generated? As more nations follow the suit and start holding bitcoin reserves, the value of bitcoin is bound to rise.

In a way one can say that holding bitcoin reserves is a counter to excessive money printing. Any country that plans to increase M1 money supply or national debt for that matter in the coming years needs to consider holding bitcoins as a way to protect its wealth and pay off debt in the long run.

What about India?

Economy advances through investment in research and development. India has not only taken the call to invest more in R&D than ever, it has also taken to call to increase its own M1 supply to advance the economy (i.e. invest in R&D and other risky endeavours) instead of using FDI which results in more outflow of the value created in the country than necessary. Reserve Assets, M0 and M1 money supply increasing by 42%, 57% and 45% respectively in the last 5 years is a testament India deciding to take risks of their own.

Breakdown of RBI’s latest reserves

The problem for India though is that a large 89% of its reserve backing currently is still constituted of  foreign securities especially US T- bills. 

If the nation issuing T-Bills creates strategic bitcoin reserve as a hedge againt inflation (increase in M1 money supply) or as a way to pay off it's debt then It is prudent for India to hold bitcoins as well.

Increasing gold holdings is an option but the upside from holding bitcoins far outweigh the upside from holding gold. This is definitely going to be the case unless

• India's creates its own alternate asset that is going to sharply rise in value (Jiocoins come to mind). Even if India goes down this path, India's current state of soft power means that upside from Jiocoins will be far less when compared to bticoins because US can influence almost every country in the world.

• BRICS nations collude to create an alternate asset class that has the potential to have better upside than bitcoin. This is theoritically possible but practically difficult as it require all the BRICS nations to delay short term gratification for years together and persevere with this new asset class. The relationship between US and Russia has taken a 180 degree turn when compared to last year because of trump's rise as president.

Irrespective of the path that it pursues, it is simply a smart idea for India to start holding bitcoin reserves!