Good governance means making sure that resources are deployed and invested for the common good. The State of North Carolina House of Representatives has just recently passed HB 721, which will require the Department of the State Treasurer to study the feasibility of holding metal bullion, like gold, and digital assets like Bitcoin (BTC).
House Bill 721 would also explore the process of acquiring, storing, insuring, and liquidating the assets involved. It will study how precious metals and digital assets will impact the portfolio of the General Fund. The study aims to check if the chosen assets will be good hedges against inflation and volatility. It will also study how it will affect the portfolio’s returns.
Lawmakers in North Carolina seemed to have a good grasp on the importance of digital assets like Bitcoin. And they also know the difference between crypto and the state-sponsored CBDC. Last May, lawmakers also passed HB 690, which acts as a roadblock to CBDC in the state.
Will the State benefit from holding Bitcoin and Gold?
Gold needs no introduction. This shiny metal has been used as money and a store of value since ancient times. Kingdoms have fought over it. Kings and states have sought to accumulate as much as they could. Even the US backed the dollar with gold up until 1971.
Gold’s malleability and electrical conductivity make it useful in manufacturing. It is an important material in modern electronics. Modern smartphones have gold components in them. Space exploration also needs this precious metal because it protects against radiation.
Its scarcity and uses make gold a sought-after investment instrument for a lot of people. But does it have a good return on investment? The chart below shows that gold bought in 2010 would have doubled in value after a decade or so.
Bitcoin, on the other hand, is often called gold digital gold. Its scarcity is often said to be better than any precious metal since it has a hard market cap of 21 million. However, there are still some who think that it is not a good investment. Let us check the facts by looking at the chart below.
The chart shows that Bitcoin has increased from less than a dollar to an all-time high of $69,000 in 2021. This represents an approximate 13,800,000% increase. The price of Bitcoin is currently at $30,000, which is still a long way from less than a dollar.
Can’t They Just Stick with the Traditional Markets?
North Carolina can just stick with the traditional markets, but their lawmakers wanted to study other assets that could potentially increase the returns for their state. For the sake of argument, let us study the returns of the S&P 500 or the SPX. The SPX is an index of the 500 largest companies listed on the US stock exchange. Below is a chart which shows the returns from 2010. The SPX gave a good return of approximately 380%. However, these returns pale in comparison to BTC.
Stocks, Gold and Bitcoin in a Portfolio
House Bill 721 is a bill that requires a study on the feasibility of adding precious metals and digital assets like Bitcoin to North Carolina’s portfolio. The study itself will determine if lawmakers will draft another law to include that said assets as part of the state’s investments.
The crypto community already knows that Bitcoin trumps other asset classes. Even big financial institutions are starting a crypto gold rush. But it is still good to know that a government-sponsored study will once and for all will determine if Bitcoin and crypto assets are good investments.