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Game Theory of Bitcoin Adoption by Nation-States

Simon Chandler
Last updated: | 7 min read
Source: Adobe/Alexey Napalkov


  • “Even if other countries do not believe in the investment thesis or adoption of bitcoin, they will be forced to acquire some as a form of insurance.”
  • The competition “will most likely be in the form of mining” Bitcoin.
  • “Countries with the least to lose in terms of monetary sovereignty are more open towards adopting bitcoin.”

Is the race on? This is a question that at least some people have been asking ever since El Salvador made bitcoin (BTC) legal tender in September, and with the Swiss city of Lugano doing essentially the same thing at the beginning of March, it’s arguably only a matter of time before other countries rush to embrace bitcoin.

This is pretty much the conclusion reached by a recent report from Fidelity Investments, whose analysts Chris Kuiper and Jack Neureuter wrote that countries — even those that don’t really “believe” in bitcoin — will be “forced” to acquire some sooner or later. As Kuiper and Neureuter argue, this is because the cost of not doing so (when others are creating BTC stockpiles) could be extremely steep.

And industry figures speaking with largely agree with this analysis, with most affirming that some kind of game theory is at play here. And while they also suggest that a race to acquire bitcoin by nation-states should push the cryptocurrency’s price up massively, they remind that the divisibility of BTC won’t make it too expensive for retail investors and users to acquire for themselves.

Game theory = Worldwide bitcoin adoption?

Fidelity’s analysts also cited game theory in their report, noting that history has repeatedly demonstrated that capital always flows where it’s welcomed the most. Basically, any country that nurtures innovation (i.e. by acquiring or adopting bitcoin) will gain an advantage over its peers, who as a result will be compelled to follow suit, for fear of being left behind.

As they wrote, “We also think there is very high stakes game theory at play here, whereby if bitcoin adoption increases, the countries that secure some bitcoin today will be better off competitively than their peers. Therefore, even if other countries do not believe in the investment thesis or adoption of bitcoin, they will be forced to acquire some as a form of insurance.”

Kuiper and Neureuter also contended that a small cost can be paid by nations today, basically as a hedge against a potentially much larger cost in the future. 

“We therefore wouldn’t be surprised to see other sovereign nation-states acquire bitcoin in 2022 and perhaps even see a central bank make an acquisition,” they concluded.

It’s possible that officials from Lugano may have read this conclusion, with the city’s officials signing a deal early in March with stablecoin issuer Tether to encourage businesses to accept bitcoin (and USDT). Speaking about the deal, Lugano Mayor Michele Foletti’s remarks basically echoed those of Fidelity’s analysts.

“Lugano is investing in its future […] We strongly believe in this technology, the potential to scale the technology […] will build a better and more open, transparent and smart city,” he said back then.

And if you ask pretty much any analyst or figure working within the crypto sector, according to them, there’s a very high probability that other jurisdictions will also turn to BTC and crypto in one way or another.

“Countries that adopt Bitcoin first will advantage their citizenry,” Human Rights Foundation’s Chief Strategy Officer, Alex Gladstein, said.

Samson Mow also agrees with the Fidelity analysts, with the CEO of game developer Pixelmatic also citing game theory in his explanation. (This March, Mow left Bitcoin-focused firm Blockstream, where he served as the chief strategy officer, to focus on “nation-state bitcoin adoption”.)

“The game theory around Bitcoin will drive nation-states to compete for Bitcoin acquisition and it will most likely be in the form of mining it. The second-order benefit will be that Bitcoin will lead more nation-states to seek energy independence in order to ensure their Bitcoin mining operations are unable to be disrupted by externalities,” he told

Indeed, there’s no shortage of people in crypto who are more or less assured that central banks and/or nation-states will have to acquire bitcoin to some extent. For Nigel Green, the CEO and founder of financial consultancy deVere Group, it’s “almost inevitable,” with a growing number doing so in the “near term.”

“Central banks, particularly in countries where there are weaker national currencies, will be witnessing in real-time the benefits of owning digital, global currencies in our increasingly tech-driven, globalized world. We can expect them to be running advanced modeling about what would happen to their economies should they fail to move early,” he told

Green also suggests that recent geopolitical issues, including the Russian invasion of Ukraine, will be exacerbating the urgency of this move, particularly as the case for Bitcoin and cryptocurrency in general is laid bare on a global scale.

However, when looking at the process of nation-by-nation adoption, some analysts argue that it won’t be the most developed nations that lead the way.

“As we’ve seen with El Salvador, countries with the least to lose in terms of monetary sovereignty are more open towards adopting bitcoin. I believe we will see the “next Salvador” in Latin America or Africa,” said Trezor Brand Ambassador Josef Tětek.

The second country to make serious moves towards bitcoin adoption may be even more important than the first one, according to Tětek, as it will confirm the emerging trend and could add momentum and impetus to the resulting race.

Priced out by nation-states?

When exactly this will happen is probably anyone’s guess, although the macroeconomic (and political) instability of the current period may accelerate the overall process, as some commentators suggest.

And when it does happen, commentators are generally unanimous in the opinion that the price of bitcoin will skyrocket.

“If a number of countries begin to compete for Bitcoin holdings, we will see a massive increase in Bitcoin price. Bitcoin in the [USD] 30-40k range is incredibly undervalued,” said Samson Mow. 

No analyst is really willing to give a precise figure, but most say that the rise would be substantial, given how limited the supply of BTC is.

“Bitcoin price would likely rise massively, mostly because such purchases would greatly increase bitcoin’s legitimacy in the eyes of everyday people. Bitcoin would graduate from an obscure crypto-anarchic money as it’s still largely perceived now, to a serious monetary asset that everyone should consider,” said Josef Tětek.

As exciting as this might seem for current holders of bitcoin, it raises the possibility that a massive rise in BTC would make the cryptocurrency extraordinarily expensive for ‘ordinary’ people to acquire. And assuming that it is adopted by nation-states and made legal tender, acquiring it would become necessary.

However, experts remind that Bitcoin is highly divisible, meaning it can accommodate huge price rises while still be usable for small transfers.

“As bitcoin’s are divisible into 100,000,000 ‘satoshis,’ even when bitcoin hits USD 1 million, satoshis will only cost around USD 0.01.  So people can buy 1,000 satoshis for just USD 100,” explained Lou Kerner, CEO of investment firm Blockchain Coinvestors.

Of course, it’s likely that we still have a long road to travel before bitcoin reaches a price of USD 1 million. If it does it all. In either case, it won’t be a smooth ride.
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