Author: Luke, Mars Finance
Recently, Bit has once again become the focus of attention in the financial world: The Pennsylvania House of Representatives has formally proposed the "Pennsylvania Bit Strategic Reserve Act", suggesting that the state's finance department allocate 10% of its approximately $7 billion in funds to Bit, in order to hedge against inflation and optimize the investment portfolio. At the same time, U.S. Senator Cynthia Lummis has submitted an even more ambitious proposal to Congress, proposing to establish a "Bit Reserve" operated by the Treasury Department and purchase up to 1 million Bit over the next five years. Trump also stated at the Bit conference on July 28 that if elected president in November, he will push for the U.S. to establish a "strategic Bit reserve" and prevent the U.S. government from selling its existing Bit reserves. Michael Saylor further emphasized at the Cantor Crypto Conference in Miami that Bit is an asset without counterparty risk, and that "the strategic Bit reserve will be the greatest trade of the 21st century". He believes that if the U.S. implements a strategic reserve, other countries will have to follow suit.
The reality is indeed the case: Not only the U.S., but more and more countries and institutions around the world are seriously considering including Bit in their strategic reserves. According to the latest report from Bitwise Europe, the optimistic sentiment towards U.S. policy initiatives and the tightening of Bit supply are jointly driving the rise in Bit prices. The betting activity on Polymarket also reflects the market's rapidly rising expectations for the establishment of national Bit reserves. On the corporate side, companies like MicroStrategy continue to purchase large amounts of Bit, further consolidating this trend.
CZ, the former CEO of Bin, publicly stated: "Countries will compete to list Bit as a reserve asset in the next few years, and no country wants to be the last to take action." From the legislative attempts of the U.S. government to the asset allocation trends of enterprises, the position of Bit as the "digital gold" of the global financial system is becoming increasingly consolidated. Globally, the total Bit held by governments, institutions and enterprises exceeds 2,669,855, accounting for 12.7% of the total Bit supply.
Why do countries and enterprises choose to hold Bit as a reserve asset? Is this simply an investment strategy, or a redefinition of the future monetary order?
The Bit Journey of Enterprises: Diverse Strategic Considerations and Deployments
By 2024, the total amount of Bit held by global enterprises will exceed 1.3 million, accounting for 6.2% of the total Bit supply. These enterprises cover a wide range of fields, including tech giants, mining companies, and fintech companies.
MicroStrategy, with 331,200 Bit, is far ahead, accounting for 1.577% of the total Bit supply. Since 2020, the company has continued to increase its Bit holdings, with a total investment of over $16.5 billion. Its executive chairman, Michael Saylor, has publicly stated many times that Bit is the "safest asset" and can effectively hedge against inflation and protect the value of the company's reserve assets.
Tesla was also one of the "big pumps" in the last bull market. In early 2021, Tesla announced the purchase of $1.5 billion worth of Bit, which attracted widespread attention in the global market. Although it subsequently cashed out some of its Bit assets, Tesla still holds 9,720 Bit, demonstrating its confidence in Bit as a long-term asset allocation tool.
Blo, Inc. (formerly Square) sees Bit as an important part of its payment and financial ecosystem. Currently, Blo holds 8,211 Bit, with a total investment of over $240 million. The company's Chief Financial Officer, Amrita Ahuja, has stated that "Bit is not only part of our asset management, but also a continuation of our mission to empower the economy and drive technological innovation."
In addition, mining companies and trading platforms also occupy an important position in Bit holdings. For example, Marathon Digital Holdings holds 25,945 Bit, mainly from its mining business. Coinbase, as one of the world's largest cryptocurrency trading platforms, holds about 9,000 Bit, providing liquidity support for the platform's reserves.
Just today, AI company Genius Group also announced that it will convert the majority of its reserve assets to Bit. The company purchased 110 Bit for $10 million, at an average price of $90,932 per Bit. This is part of its plan to hold over 90% of its current and future reserves in Bit, with an initial target of $120 million.
The motivations behind these companies' decisions to hold Bit are diverse, including hedging against economic fluctuations, improving asset returns, and participating in the digital economy ecosystem. From a global perspective, corporate attention to Bit is not just about short-term investment returns, but also reflects a strategic layout for the future monetary and financial system.
1. Hedging Inflation Risk
Against the backdrop of continued global monetary easing, inflationary expectations are rising, and the purchasing power of many companies' cash reserves is facing the risk of erosion. For example, MicroStrategy, as one of the earliest companies to massively purchase Bit, currently holds about 330,000 Bit, with a total investment of over $4.9 billion and an average purchase price of $49,874 per Bit. As of November 2024, its overall investment return rate has exceeded 80%. The company's executive chairman, Michael Saylor, stated that they chose Bit because they believe it can protect their wealth from the erosion of fiat currency devaluation.
According to data from the International Monetary Fund (IMF), the average annual inflation rate of the world's major economies has been around 5% since 2021, while the Bit price has risen by more than 300% during the same period. This growth rate shows that Bit has become an important choice for companies to deal with inflation.
2. Asset Diversification
Traditionally, companies' reserve assets are mainly cash and short-term bonds, but in the increasingly complex global economic environment, Bit is gradually becoming an effective means for companies to achieve asset diversification, helping to enhance financial flexibility. Tesla is an example of this, having purchased $1.5 billion worth of Bit in early 2021 and still holding 9,720 Bit as of mid-2024. Although the price fluctuations of Bit have posed certain challenges to its finances, Tesla CEO Elon Musk believes that the long-term return on Bit is far higher than traditional asset allocation. As mentioned in the company's financial report, "the addition of Bit allows us to manage our cash assets more flexibly while potentially achieving higher returns."
This strategy is not uncommon in the corporate world. According to data from treasuries.bitbo.io, there are currently 92 companies globally holding a total of over 2.6 million Bit, accounting for 12.7% of the total Bit supply. These data indicate that asset diversification strategies are being increasingly favored and implemented by more and more companies.
3. Technological Innovation and Brand Image: Standing at the Forefront of the Times
For many companies, holding Bit is not only an investment, but also a way to showcase their technological innovation and values. By supporting decentralized technology and the digital economy, these companies demonstrate their commitment to the future. Blo, Inc. holds 8,211 Bit, with a total investment of about $240 million. The company has promoted the development of Bit payment technology, and its payment platform Cash App allows users to directly buy and hold Bit. This strategic choice helps to enhance the company's tech-savvy image among young users, while also demonstrating its determination to drive the development of new economic technologies through practice.
The public also generally holds a positive attitude towards companies that hold Bit. According to a survey, more than 50% of millennial consumers are more inclined to support companies that "value digital assets and blockchain technology". For tech companies, this strategy obviously helps to enhance their brand image and attract the younger user group.
4. Core Reason: Potential High Returns
The long-term growth potential of Bit makes it an important choice for enterprises to achieve asset appreciation, as enterprises are primarily oriented towards making money. Although the price of Bit fluctuates greatly, the average annual growth rate of Bit has exceeded 100% over the past decade. Marathon Digital Holdings currently holds 25,945 Bit, with a total investment of over $800 million. The company's CEO, Fred Thiel, said that while the volatility of Bit brings risks, it also provides unprecedented growth opportunities. They firmly believe that by holding Bit, the company will create tremendous value for shareholders in the coming years.
Historical data shows that since 2013, the price of Bit has grown more than 200-fold, far exceeding the return of the S&P 500 index over the same period. Although there is volatility in the short term, the long-term appreciation potential is a huge attraction for enterprises.
Sovereign States: Motivations Behind Bit Strategic Reserves
In recent years, in addition to companies actively incorporating Bit into their asset allocation, some countries have also begun to try to include Bit as part of their national strategic reserves. On November 10, David Bailey, CEO of Bit magazine, revealed on a social platform: "At least one sovereign state is actively acquiring Bit and has become one of the top five Bit holders in the world. We hope to hear from them soon." This statement has sparked widespread attention from the outside world on the situation of sovereign states holding Bit.
Currently, multiple governments around the world, including the United States, China, and Russia, are either actively or indirectly involved in holding Bit. The United States is the current global leader in Bit holdings, with a reserve of 207,189 Bit, which are mainly derived from confiscation and seizure in law enforcement actions, with a current value of about $18.87 billion, accounting for 0.987% of the total Bit supply. In the future, if Trump's proposal is passed, the United States will also actively establish a Bit reserve.
China ranks second with 194,000 Bit, worth about $17.67 billion. These Bit are mainly from government confiscation after cracking down on illegal activities. Although China has adopted strict regulation of cryptocurrencies at the policy level, the Bit confiscated in judicial disposition and law enforcement processes still constitute an indirect source of its holdings.
Russia's Bit holdings are mainly achieved indirectly through its abundant mining resources. Although the Russian government has not publicly disclosed the specific holding amount, its mining industry accounts for about 11% of the global Bit mining share, ranking third in the world. This provides an important foundation for Russia to accumulate Bit reserves through mining. Due to Western sanctions, Russia is seeking to bypass the SWIFT system through Bit and explore new ways of cross-border trade. In 2024, President Putin signed a bill to formally legalize Bit mining and use abundant energy resources to support the Bit mining industry. Russia has also proposed to use cryptocurrencies to pay for international trade, which highlights the position of Bit in Russia's financial sovereignty strategy.
Other countries are also gradually emerging in the Bit field. The United Kingdom holds 61,000 Bit, worth $5.56 billion; Ukraine holds 46,351 Bit, worth $4.22 billion; and Bhutan holds 13,029 Bit, worth $1.19 billion. In addition, El Salvador, as the first country in the world to adopt Bit as legal tender, currently holds 5,748.8 Bit, worth about $520 million, marking the country's active exploration of Bit as an economic tool.
The motivations behind sovereign states' choice to hold Bit are diverse: hedging economic risks, achieving financial sovereignty, bypassing economic sanctions, and promoting digital economic innovation.
1. Hedging Economic Sanctions and Enhancing Financial Sovereignty
For some countries facing international economic sanctions, the decentralized nature of Bit provides them with a way to bypass the traditional financial system. For example, countries like Venezuela and Iran, due to facing financial sanctions from Western countries, have encountered serious obstacles in international transactions and capital flows. Bit is not dependent on traditional banks and intermediaries, so it can become a tool for these countries to bypass sanctions and maintain international trade and access to foreign exchange.
Furthermore, by holding Bit, countries can reduce their dependence on the US dollar to a certain extent, thereby enhancing their financial sovereignty. Especially for some developing countries that are concerned about the US dollar hegemony, holding Bit has become an important means to increase their financial independence. El Salvador is a typical example in this regard - the country adopted Bit as legal tender in 2021 and added Bit to its strategic reserves, trying to reduce its dependence on the US dollar through this strategy, while also attracting global cryptocurrency investors.
2. Hedging Inflation and Fiat Currency Depreciation
Some countries are facing high inflation and fiat currency depreciation, and the scarcity (cap of 21 million) and decentralized nature of Bit make it an effective hedging tool. For example, countries like Argentina and Turkey have had persistently high inflation rates in recent years, and their residents and governments are facing the problem of rapid depreciation of their local currencies.
In this case, Bit, as "digital gold", is seen as an attractive choice, which can help these countries reduce the losses caused by local currency depreciation through strategic reserves. In fact, the central banks of some developing countries have already begun to study incorporating cryptocurrencies as part of their international reserves, so that they can have a means of value preservation that is not affected by traditional monetary policies when facing local currency depreciation.
3. Promoting Digital Economic Development and Attracting Foreign Investment
Another important motivation for Bit strategic reserves is to promote the development of the national digital economy by embracing cryptocurrencies. Especially for countries like El Salvador, by legalizing Bit and adding it to their strategic reserves, they are trying to attract international cryptocurrency companies, investors, and entrepreneurs to build a blockchain-based digital economic ecosystem.
This approach can not only promote local economic development, but may also bring certain tourism revenue and foreign exchange revenue. El Salvador's President Nayib Bukele has clearly stated that the use of Bit can help the country get out of its past economic difficulties and usher in a new digital economic era. In this way, the country hopes to enhance its voice in the international financial market and encourage domestic economic digitalization by holding Bit.
The Future: Opportunities and Challenges of Strategic Reserves
Trump's promise to establish a Bit strategic reserve for the United States after taking office seems to be seen as a prelude to Bit reaching its peak. The market is experiencing FOMO, and people are generally optimistic, and most of the signals we encounter indicate that countries and enterprises will continue to buy in. But will the future really develop in this way?
For Bit strategic reserves, the traditional financial industry is not without negative views. James Mackintosh, a senior market columnist at The Wall Street Journal, believes that for economic powers like the United States, the need to hold Bit as a strategic reserve is not great. He pointed out that the stability of the US economy mainly depends on "the government's credit", rather than the support of foreign exchange reserves. The high volatility of Bit makes it difficult to become a reliable national reserve tool.
The billionaire head of the cryptocurrency investment firm Galaxy Digital also takes a cautious attitude. He believes that the possibility of Trump incorporating Bit into the US strategic reserve is not high. Novogratz said in an interview with Bloomberg on Wednesday: "I still think the chances are quite small." He explained that although the Republicans currently control the Senate, the number of seats is not enough to ensure that this proposal can be smoothly passed.
The future of Bit is undoubtedly full of uncertainty, and both supporters and opponents have sufficient reasons to believe in their own judgments. For enterprises and countries, holding Bit may be an attempt to explore the future of finance, but it also means accepting the challenge of high volatility and uncertainty. The fate of Bit depends on market sentiment, policy environment, and technological development. Perhaps as Mackintosh said, "Bit relies more on animal spirits than economic analysis." Therefore, in this game of digital assets, who will win the final victory remains to be seen. In any case, as investors, we need to find a balance between enthusiasm and rationality. In the vast wave of financial transformation, how the future will unfold remains to be seen.
