This isn't the first year that people in positions of power started to talk about Bitcoin (BTC 1.67%), but it's definitely the first year in which it's important enough for heads of state to be regularly commenting. And when top politicians weigh in on what they think should be done regarding a certain asset, it behooves investors to listen, as it's almost always information that's relevant to an asset's chances of gaining value over the long term.
In that vein, one prime minister in particular had a provocative take on Bitcoin recently. If leaders are thinking like he is, it will be especially bullish, so let's dive in and see what he said and why it matters.
This cryptocurrency has a strategic role now
During an interview in April with Al Jazeera, the prime minister of Bhutan, Tshering Tobgay, had six choice words to say about mining Bitcoin: "I think governments should do it." That's quite the green flag for Bitcoin bulls for a few reasons.
In case you're not familiar, Bhutan is a Himalayan nation with a population of less than 1 million people. It generates all of its energy via hydropower, and it typically produces more energy than it needs. Rather than selling its excess energy production to its energy-hungry neighbors, China and India, it often opts to use it to mine Bitcoin, generating more value. It then uses the proceeds to pay its civil servants more than they'd be able to make otherwise, thereby helping with personnel retention -- an area that Bhutan has recently struggled with.
Image source: Getty Images.
In other words, Bhutan is a living example showing that mining or holding Bitcoin can help governments to ease fiscal constraints and solve problems that they would otherwise lack the resources to address. Other countries with similar capabilities, such as substantial renewable or sustainable energy sources, will now see that they might also have an incentive to use their assets to mine Bitcoin. And over the long term, that will likely drive more sovereign adoption, increasing demand for the coin, as well as its price.
Another reason the comments from Bhutan's prime minister are so bullish is that the country is proof that Bitcoin mining does not need to be at odds with environmental ideals. That's contrary to years of the coin having a bad reputation for sometimes being mined with energy derived from coal power, which has thus been an impediment to more widespread adoption among environmentally conscious investors in the developed world. If Bitcoin is increasingly mined using sustainable energy, some of those reticent investors may eventually be coaxed off the sidelines.
Finally, the Bhutan example shows that it isn't necessary for a government to make extreme strategic commitments to mining Bitcoin for the venture to be worthwhile. Bhutan doesn't account for even 0.01% of the global hashing power for mining, but it's still benefiting enough from the small amount of mining it does for its prime minister to be an evangelist for the coin. Therefore -- assuming that other nations notice the great results Bhutan is getting with its mining operations -- it's evidence that large investment is not a precursor to generating some value with Bitcoin, which could help to prompt developing countries to initiate programs of their own.
Expect more governments to invest
It's currently the golden age of governments following Bhutan's lead and buying, holding, or mining Bitcoin.
As success stories start to pile up, both from starting mining operations and from financial gains delivered by holding, it will create more sovereign buying pressure, as well as larger sovereign stockpiles that effectively reduce the float of coins available for public trading. That will ultimately force buyers to compete over a smaller supply, pushing prices higher.
As you probably know, governments tend to have a lot more capital to commit to investments than individuals or even companies. So if Bhutan's strategy is anything like what other countries might pursue, it's a significant bullish sign because it means there's going to be a lot more capital flowing into Bitcoin, and soon.
