As a global strategic reserve asset, gold has a history of over a thousand years, while , at 15 years old, is launching a new challenge.
Author: Web3 Farmer Frank
What is the concept of a 1 million strategic reserve asset?
According to the World Gold Council, as of the third quarter of 2024, the Federal Reserve's gold reserves totaled 8,133.46 tons (about $530 billion), ranking first in the world, while 1 million are currently worth nearly $100 billion, almost equivalent to 19% of the US gold reserves!
With the rise of Trump and more and more institutions/enterprises, and sovereign states beginning to consider setting up a "Bitcoin strategic reserve", will Bitcoin's "Fort Knox moment" arrive? Can it become part of the global reserve asset system like gold?
The next decade may be the key time window for the answer to be revealed.
What does 'strategic reserve asset' mean?
At the Bitcoin2024 conference held in July 2024, Trump publicly promised in his speech to 'never sell' the BTC held by the government and future acquisitions, and to persist with the concept of 'strategic BTC reserve'.
Now, with Trump's election and the recent appointments of crypto-friendly individuals to key positions such as the US Treasury Secretary, SEC Chair, and White House Crypto Czar, the idea of the US incorporating BTC into its strategic reserves is undoubtedly closer to being realized.
So what exactly is a 'strategic reserve asset'?
Simply put, a 'strategic reserve asset' is a critical asset held by a national or regional government, aimed at addressing economic volatility, financial crises or geopolitical risks, and maintaining the country's financial stability, economic security and international competitiveness. They typically have high value and widespread acceptance, security and stability, and liquidity.
At the corporate level, 'strategic reserve assets' also help enterprises/institutions achieve financial stability, enhance risk resistance, and support their long-term growth strategies. Especially during economic downturns, strategic reserve assets are often the first line of defense for companies against risks.
Traditional strategic reserve assets mainly include:
- Gold: Widely regarded as a stable value storage tool due to its scarcity and anti-inflation ability;
- Foreign exchange reserves: Reserve currencies led by the US dollar, an important means of supporting international trade and payments;
- Special Drawing Rights (SDRs): Allocated by the International Monetary Fund (IMF) to supplement the official reserves of member countries;
This also means that for an asset to become a 'strategic reserve', it must have comprehensive advantages such as value stability, global recognition, and convenient circulation. As an emerging digital asset, BTC is gradually meeting these conditions and is beginning to be seen as a potential alternative to gold.
Notably, in addition to Trump's 'promise', on July 31, 2024, US Senator Cynthia Lummis also submitted the 'American BTC Strategic Reserve Act of 2024' to the US Congress, which requires the US Treasury to purchase 1 million BTC within 5 years and hold them for at least 20 years, unless used to repay outstanding federal debt, and even plans to require the Federal Reserve to 'use a certain amount of net income each year to purchase BTC'.
The goal of this plan is to ensure that the US government can hold a large amount of BTC over the next twenty years, providing the country with a long-term financial hedging tool. The bill has been submitted to the US Senate Banking, Housing and Urban Affairs Committee for discussion and voting, and will then be sent to Trump for signature after passing both houses.
Why is it BTC, other than gold and foreign exchange?
To some extent, gold reserves are not absolutely the more the better.
First, as a physical asset, gold does not earn interest or yield, and also lacks liquidity yield, which is the main reason why Buffett has always held a negative attitude towards it - "Gold doesn't pay you interest, so it doesn't have the compounding effect".
Here is the English translation of the text, with the terms in <> retained as is: The more important thing is that holding gold reserves requires high storage and maintenance costs, especially for the vast majority of countries, how to effectively manage and protect gold reserves has become an unavoidable fiscal burden, such as the world-famous Federal Reserve's main gold warehouse "Fort Knox", in order to ensure the safety of gold storage, it has invested an enormous amount of resources: Not only is it located in the strategic heartland of the United States in Kentucky, but it is also deeply buried underground, surrounded not only by thick steel and concrete walls and 24/7 security equipment, but also guarded by thousands of soldiers year-round, making the storage of gold reserves not only a security need, but also a long-term and expensive fiscal investment. In comparison, the storage cost of Bitcoin is almost negligible, requiring no physical storage space and no need for expensive protection facilities, relying only on secure wallets, multi-signature technology, and a decentralized network verification system to achieve efficient storage and management. At the national level, the storage cost of Bitcoin is mainly concentrated in technology and network maintenance, far lower than the physical protection cost of gold, which also means that even if Bitcoin does not generate direct returns, its holding cost is still significantly lower than gold, leaving more room for asset net growth. At the same time, the transaction of physical gold often involves complex processes such as physical delivery, storage, and transportation, which may take days or even weeks, and the gold market is usually limited by the trading time and geographical restrictions of the traditional financial system, Bitcoin can be traded 24/7 on exchanges, covering the global market. The US government: one of the world's largest Bitcoin holders Surprisingly, the US government is actually one of the world's largest Bitcoin holders, over the years, the US has seized a large amount of Bitcoin from cybercriminals, money laundering organizations, and dark web markets through law enforcement actions, and still holds about 200,000 Bitcoin today, worth nearly $20 billion at the time of writing. El Salvador: Buying 1 BTC per day El Salvador is the first country in the world to establish Bitcoin as legal tender, and has even launched the Chivo digital wallet, providing each resident who downloads the wallet with $30 worth of Bitcoin. Currently, El Salvador continues to buy 1 BTC per day, and as of December 10, its BTC holdings have reached 5,959.77 BTC, with a holding value of about $577 million. MicroStrategy: All-in on Bitcoin MicroStrategy, a publicly traded company, is undoubtedly the absolute representative in the field of Bitcoin "hoarding" - its "buy, buy, buy" strategy for Bitcoin has long been a big move, and its holdings have already exceeded the reserves of any sovereign nation. "Hodl Bitcoin" Tesla In 2021, Tesla announced the purchase of $1.5 billion worth of Bitcoin. According to Arkham data, as of the time of writing, Tesla's Bitcoin holdings have reached 11,509 BTC, with a holding value of about $1.1 billion. Other countries and mainstream companies/institutions: Bitcoin reserves are becoming mainstream It is worth noting that the strategic value of Bitcoin is gradually spreading from the national level to the corporate and institutional level, although the reserve layout of countries will directly affect the policy environment, but companies are the main practitioners of adoption, so Bitcoin is not only a hedging tool, but is also gradually becoming a strategic component of corporate balance sheets.Here is the English translation, with the content inside <> retained without translation:Recently, tech giants like Microsoft and Amazon have also been the subject of active initiatives from investors, urging them to include Bitcoin on their balance sheets. Michael Saylor, the founder of MicroStrategy, has even directly suggested to Microsoft's board of directors to invest in Bitcoin, believing that this move can significantly increase the company's value and create long-term returns for shareholders.
At the same time, the National Center for Public Policy Research, a conservative think tank in the United States, has also proposed that Amazon should invest 1% of its total assets in Bitcoin, with the aim of enhancing shareholder value and hedging against the risk of traditional currency depreciation.
From an objective perspective, the inclusion of Bitcoin on the balance sheets of mainstream institutions and traditional enterprises can indeed bring the following multiple advantages to the companies:
- Inflation resistance: The scarcity of Bitcoin, with a fixed total supply of 21 million, endows it with strong anti-inflationary properties, which can help companies stabilize the value of their assets in the environment of global monetary easing and fiat currency depreciation;
- Diversified investment portfolio: As an emerging asset class, Bitcoin provides companies with opportunities for rich asset allocation, reducing their dependence on a single asset class and enhancing their overall financial resilience;
- Enhance corporate brand and market image: Holding Bitcoin not only reflects the company's support for innovative technology and future economic models, but also can enhance the company's competitiveness in the market and create a more forward-looking brand image.
However, in the process of incorporating BTC into the balance sheet, companies need to solve two key issues: how to safely custody large-scale assets, and how to efficiently complete OTC (over-the-counter) transactions to avoid market impact.
This makes professional custodial and OTC service providers an indispensable part, such as the example of OSL, the first licensed exchange in Hong Kong, which designs independent wallets for each client and is protected by a bankruptcy-isolated trust structure to ensure the absolute security of the clients' BTC.
In addition, OSL has currently collaborated with leading insurance giants like Canopius to expand the insurance coverage to $1 billion, covering various potential asset loss scenarios such as cyber attacks, fraud, and technical failures.
In terms of OTC, as a regulated licensed compliant platform, OSL can achieve near-instant fiat settlement thanks to its close cooperation with major banks in Hong Kong, and the deposit and withdrawal processes all follow strict mechanisms, greatly reducing the risk of bank account freezing.
Bitcoin in the Next Decade: Speculative Asset or Global Strategic Reserve?
Today, Bitcoin has grown from a marginalized asset to an emerging candidate for a global strategic reserve, with more and more forces, from sovereign states to mainstream institutions/traditional enterprises, redefining its role. Its scarcity, decentralized nature, and high transparency have made it widely regarded as "digital gold".
Although its price volatility is still a focus of external debate, the adoption of Bitcoin is progressing at an undeniable pace. If the "strategic reserve asset" concept proposed by Trump becomes a reality, the status of BTC will undoubtedly closely follow that of gold, and its strategic significance may even surpass gold:
While gold has physical scarcity, its distribution and trading rely on a complex logistics and regulatory system, whereas Bitcoin, based on blockchain technology, does not require physical storage or transportation, and can achieve borderless rapid circulation. This feature makes it more suitable as a reserve asset for nations and institutions in the global financial system, and able to undertake more strategic responsibilities.
Against this backdrop, the potential of Bitcoin as a global strategic reserve asset will be fully unleashed in the next decade, and its application scenarios may also be further expanded.
Whether it is a national-level "long-term hoarding" plan or a corporate/institutional "buy and hold" strategy, the global influence of Bitcoin is expanding at an undeniable pace. Global national leaders, as well as globally renowned companies like MicroStrategy, Microsoft, and Amazon, have become the best advocates for Bitcoin, greatly promoting the acceptance of cryptocurrencies in the global market.
From this perspective, the ability of service providers like OSL to help companies and institutions overcome challenges from custody to trading is undoubtedly crucial, and as more and more companies/institutions and countries/regions deploy Bitcoin, the infrastructure construction in this field will undoubtedly play a more important role in the future.
"The light boat has crossed the mountain." Regardless of whether Bitcoin can become a strategic reserve asset for the United States or other countries in the next 4 years, it has already won an important victory on the path of adoption.
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