Last weekend, a rumor that Trump would announce BTC as a strategic reserve asset for the United States at the Bitcoin 2024 conference spread widely. With Bitcoin quickly returning to $68,000, the market sentiment also rose a lot. Everyone is looking forward to the "crypto president" to go crazy again at the Bitcoin conference this weekend.
What are national strategic reserve assets?
National strategic reserve assets refer to assets held by a country to cope with economic uncertainty, external shocks or other emergencies. These assets usually include traditional safe-haven assets such as gold, foreign exchange reserves represented by the US dollar, euro, and yen, special drawing rights (SDRs) allocated by the International Monetary Fund (IMF), and government bonds, foreign currency-denominated deposits, and other highly liquid assets.
The composition and management of reserve assets play a vital role in a country's economic stability and its relationship with international financial institutions such as the IMF.
Dennis Porter, co-founder of Satoshi Action Fund, who is also a participant in the Bitcoin conference, posted on social media that the most likely direction for Bitcoin to become a strategic reserve asset of the United States is to become the US Treasury's Exchange Stabilization Fund (ESF).
The ESF is a special fund operated by the U.S. Treasury established under the Gold Reserve Act of 1934, with the primary goal of stabilizing the value of the U.S. dollar. The ESF provides the Treasury with tools to conduct currency and gold operations to influence exchange rates and promote stability in foreign exchange markets. Today, Bitcoin is generally considered a foreign currency in the United States.
Markus, a researcher at 10x Research, analyzed that the US government currently holds about 212,847 bitcoins, worth about $15 billion. In comparison, its total gold reserves are about 261.5 million troy ounces, worth about $600 billion. If the amount of Bitcoin held doubles ($15 billion), it is almost equivalent to the net inflow of funds into Bitcoin spot ETFs from the beginning of the year to date ($16 billion), which will undoubtedly be more influential in terms of signal effect.
On July 25, Republican Senator Cynthia Lummis of Wyoming, who supports cryptocurrency, is planning to announce Bitcoin Strategic Reserve legislation at the Bitcoin Conference. Although the specific content of the bill is still unclear, according to a person who has seen the first draft, the purpose of the bill is to instruct the Federal Reserve to purchase Bitcoin and hold it as a reserve asset, just as the U.S. central bank holds gold and foreign currencies, to help manage the U.S. monetary system and keep the value of the dollar stable.
Asset manager Bryan Courchesne also recently appeared on CNBC to discuss the potential of Bitcoin to become a strategic reserve asset for the U.S. government under a future Trump administration. According to the asset manager, adopting Bitcoin as a reserve asset would be difficult, but not impossible. Courchesne noted that the U.S. Department of Justice holds 200,000 Bitcoins, which makes the U.S. government the largest holder of Bitcoin, second only to the anonymous creator Satoshi Nakamoto. The Department of Justice could simply transfer Bitcoin to the U.S. Treasury, paving the way for the Treasury to begin accumulating and holding this scarce asset for the long term.
If Trump really announces at the conference that Bitcoin will be used as a national strategic reserve asset in the future, what impact will it have on Bitcoin and even the crypto industry?
If this comes true, its status will be comparable to real gold
The first thing that will be affected is the price. As one of the world's largest economies, the United States' policy changes have a huge impact on the global financial market. The news that Bitcoin has become a strategic reserve asset will trigger a strong reaction in the market, and investors' demand for Bitcoin will increase sharply, thereby pushing up its price.
This will also greatly enhance its mainstream recognition. Other countries and institutions may follow the footsteps of the United States and include Bitcoin in their reserve assets, thereby further consolidating Bitcoin's position in the global financial system. As more countries and institutions use Bitcoin as a reserve asset, its nature determines that its holders tend to hold it for a long time, and the volatility of the Bitcoin market may be reduced.
But before that, we need to realize that it is not up to one person to decide whether an asset can become a strategic reserve asset of a country. Even if Trump is really elected as the new president, he cannot make Bitcoin a strategic reserve asset by himself. This process will involve extensive deliberations by policymakers, economists and financial experts, and will also require approval from Congress and coordination with the Federal Reserve and the Treasury Department.
When all this is settled, the United States may formulate and implement clearer and stricter cryptocurrency regulatory policies in order to protect and manage its strategic reserve assets. These policies may have a profound impact on the entire cryptocurrency market, prompting other countries to strengthen their regulation of cryptocurrencies.
As Bitcoin grows in importance, the infrastructure and technology behind it will also develop further, including more secure storage solutions, more efficient transaction systems, and a more complete legal and regulatory framework.
Bitcoin’s role as a strategic reserve asset may change the structure of existing financial markets. The title of “digital gold” will challenge the status of traditional assets (such as gold and treasury bonds) in reserve assets, and portfolio diversification and risk management strategies will also change.
Regardless of the final outcome, there is no doubt that the crypto industry has entered a more mainstream social vision through politics.
