Recently , a rumor that Trump will announce that BTC will be used as a strategic reserve asset of the United States at the Bitcoin 2024 conference has been widely circulated. At that time, the market sentiment also increased a lot. Everyone was looking forward to this "crypto president" in this meeting. There was another craziness at the Bitcoin conference over the weekend.
What are national strategic reserve assets
National strategic reserve assets refer to assets held by a country to respond to economic uncertainty, external shocks or other emergencies. These assets usually include traditional safe-haven assets gold, foreign exchange reserves represented by the US dollar, euro, and Japanese yen, reserve assets Special Drawing Rights (SDR) allocated by the International Monetary Fund (IMF), as well as 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 the Satoshi Action Fund who was also a participant at the Bitcoin Conference, posted on social media that the most likely direction for Bitcoin to become a U.S. strategic reserve asset is to become the U.S. Treasury Department’s Foreign Exchange Stabilization Fund. (ESF).
The ESF Fund is a special fund operated by the U.S. Treasury Department established under the Gold Reserve Act of 1934. Its main goal is to stabilize the value of the U.S. dollar. The ESF provides the Treasury with the tools to conduct currency and gold operations to influence exchange rates and promote foreign exchange market stability. Today, Bitcoin is generally considered a foreign currency in the United States.
Markus, a researcher at 10x Research, analyzed that the U.S. government currently holds approximately 212,847 Bitcoins, worth approximately $15 billion, compared with its total gold reserves of approximately 261.5 million troy ounces, worth approximately $600 billion.
If Bitcoin holdings double ($15 billion), it is almost equivalent to the year-to-date net inflows into Bitcoin spot ETFs ($16 billion), which will undoubtedly be more influential from a signaling effect.
On July 25, Wyoming Republican Senator Cynthia Lummis, who supports cryptocurrency, is planning to announce Bitcoin strategic reserve legislation at the Bitcoin Conference. While the specifics of the bill are unclear, one person who has seen an early draft said the purpose of the bill is to direct the Federal Reserve to purchase Bitcoin and hold it as a reserve asset, much like the U.S. central bank holds gold. and foreign currencies to help manage the U.S. monetary system and keep the value of the U.S. dollar stable.
Lummis also hinted at a big announcement on her X account: "Big things are happening this week, so stay tuned."
Extended reading: U.S. senators propose including BTC in central bank reserves, will Trump support it?
Asset manager Bryan Courchesne also recently discussed on CNBC the potential for 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 will be difficult, but not impossible.
Courchesne pointed out that the U.S. Department of Justice holds 200,000 Bitcoins, making the U.S. government the largest holder of Bitcoin, second only to anonymous creator Satoshi Nakamoto. The Justice Department 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 it comes true, its status will be comparable to real gold.
If Trump really announces at the conference that he will use Bitcoin as a national strategic reserve asset in the future, what impact will it have on Bitcoin and even the encryption industry?
The first one to bear the brunt is the price impact. As the United States is one of the world's largest economies, its policy changes have a huge impact on global financial markets. The news that Bitcoin has become a strategic reserve asset will trigger a strong reaction in the market, and investor 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 decrease.
It’s not Trump who has the final say
But before that, we need to realize that it is not up to one person to decide whether an asset becomes a country's strategic reserve asset. Even if Trump is really elected as the new president, he alone cannot make Bitcoin a strategic reserve asset. The process will involve extensive deliberations among policymakers, economists and financial experts and will also require congressional approval and coordination with the Federal Reserve and Treasury Department.
When the dust settles, the United States will likely formulate and implement clearer and stricter cryptocurrency regulatory policies in order to protect and manage its strategic reserve assets. These policies could have a profound impact on the entire cryptocurrency market, prompting other countries to also tighten regulations on cryptocurrencies.
As Bitcoin grows in importance, the related infrastructure and technology will develop further. This includes more secure storage solutions, more efficient trading systems, and improved legal and regulatory frameworks.
Bitcoin’s role as a strategic reserve asset could change the structure of existing financial markets. The title of "digital gold" will challenge the status of traditional assets (such as gold and government bonds) in reserve assets, and the diversity of investment portfolios and risk management strategies will also change.
Regardless of the final outcome, there is no doubt that the encryption industry has entered a more mainstream social perspective through politics.
