The ‘sovereign race’ to adopt Bitcoin accelerating
26 AUG, 2025
By Bitwise
Although Bitcoin’s recent performance has been affected by weakening global growth expectations, sovereign interest in adopting it is growing around the world. Countries like Brazil and Japan are helping to support itds bullish outlook.
Comment by André Dragosch, Head of Research for Europe at Bitwise:
Over the past few days, although crypto assets have been supported by growing expectations of a monetary policy easing by the Fed, there has once again been a strong divergence in performance, with Ethereum continuing to outperform Bitcoin.
Many analysts have attributed this movement to the likelihood of a rate cut by the Fed, estimating a 25 basis point reduction in September with a probability of around 90%.
The initial reaction of crypto assets to Powell’s remarks, as well as that of other traditional financial assets, was very positive: the speech was interpreted as relatively “dovish”, with an emphasis on the slowdown in the labor market rather than on accelerating inflation dynamics. However, some macro analysts pointed out that the overall tone of the speeches by Powell, Hammock, and Collins on the same day was actually “hawkish”, based on a linguistic analysis of the language used. That said, at the time of writing, Fed Funds Futures still price in an 86% probability of a rate cut in September, while Polymarket data implies an 85% probability of a 25 basis point cut or more.
It’s important to note, however, that over the past six months the main driver for Bitcoin has been the rebalancing of global growth expectations, and not changes in monetary policy outlook. More specifically, according to our analysis model, these changes explained 78% of the variation in Bitcoin’s performance. Recently, global growth expectations have slightly weakened, weighing on Bitcoin. The increased probability of a Fed rate cut could in fact be tied to this slowdown in growth, particularly in the United States.
Additionally, during this same period, there has been renewed downward pressure on Bitcoin due to the sales by a whale, who liquidated over 24,000 BTC. The downward moves were further amplified by an increase in long position liquidations on futures. However, it's worth noting that the overall amount of profit-taking by whales has decreased compared to the high levels seen in July, suggesting that selling pressure may be gradually easing.
Net flows into global crypto ETPs have reversed, but the positive spread between ETH and BTC has remained: ETH has shown greater resilience than BTC after Jackson Hole, likely because the EU and ECB are considering implementing the digital euro (CBDC) on Ethereum or Solana.
At the same time, bullish news has emerged regarding sovereign adoption of Bitcoin from various parts of the world. In Brazil, for instance, a historic hearing is expected on Bill 4501/24, which proposes a sovereign Bitcoin reserve (RESBit) of up to $19 billion (5% of the country’s foreign exchange reserves), while in Japan, the Finance Minister has made favorable statements toward diversified investments in crypto assets and a more advantageous tax treatment. Moreover, the country seems intent on approving Bitcoin ETFs next year.
It therefore appears that the “sovereign race” to adopt Bitcoin is gradually accelerating.
In the United States, the BITCOIN Act of 2025 (S.954) is still stuck in committee, but a faster pace of sovereign adoption in other parts of the world could stimulate the legislative process overseas.
Overall, we believe that Bitcoin and crypto assets remain in a bull market, supported by the expected expansion of global money supply, the approaching Fed rate cuts, and a likely reacceleration of liquidity growth in the United States.
