In the USA, Donald Trump returns to the White House. During his term, he made a number of pro-Bitcoin promises. One of them is to replenish government reserves with bitcoin. In this article, I will analyze whether the Strategic Bitcoin Reserve in the US is still just a dream of crypto enthusiasts or whether it will soon become a new standard for securing state reserves.
Central bank and government reserves
First, let me explain why central banks need foreign exchange reserves at all. These are intended to stabilize the economy and ensure confidence in the financial system. Foreign exchange reserves enable central banks to intervene in the foreign exchange market to stabilize the exchange rate of the national currency. In addition, there is prevention of excessive exchange rate fluctuations. When the domestic currency exchange rate is too low or too high, the central bank may buy or sell foreign currencies to reduce this volatility.
It is also important to protect the economy against financial crises. In the US, this is especially important now, as data suggests that the US economy may fall into recession. Currency reserves are a safety buffer in the event of such phenomena, as well as protection against the outflow of foreign capital or a decline in exports. The latter may become a real threat during Trump’s term of office, because he wants to declare a trade war on both China and the European Union.
The latter includes another element: maintaining investor confidence. A high level of reserves proves the country’s financial stability and reduces the risk of capital flight. Additionally, foreign exchange reserves can be used to finance the balance of payments deficit when the country’s foreign expenditure (imports, capital outflow) exceeds its revenues (exports, capital inflows).
Reserves also enable the country to make payments in international trade even in difficult economic times, including during times of war. The latter also threatens the USA – especially if a pro-war faction comes to power (i.e. convinces Trump) in the USA.
In turn, in the case of a strategic reserve (not the Fed’s, but the government’s), it is a stock of assets or raw materials that can be “released” and released to the market when needed. The best example is the Strategic Petroleum Reserve, which was created in response to the Arab oil embargo of 1973–1974. Since then, the US has used it for various reasons: from ensuring oil supplies after natural disasters to reducing inflationary pressure (this was the case, for example, this year).
Strategic Bitcoin Reserve
Now that you know why central banks and governments hold reserves, it’s worth returning to the president-elect’s promise.
During the election campaign, Trump promised that as president he would block any attempts to sell bitcoins that the US already has. This concerns funds that have been seized from criminals over the years. As of the writing of this article, the United States has 203,200 BTC, which at today’s exchange rate is over 18 billion. USD. In addition, at the same time, Senator Cynthia Lummis presented her bill. In short, it is about the purchase of one million bitcoins by the US over the next 5 years. The document, if passed in Congress and signed by the US president, will require the authorities to replenish their reserves with bitcoins. This would be a great breakthrough for the entire cryptocurrency market. Valuations of several hundred thousand or even a million USD for 1 BTC do not seem unattainable then, as they did a few years ago.
But let’s get back to the present – the United States has problems with growing public debt. In August 2024, the U.S. national debt reached $35 trillion and is increasing by $1 trillion every few months. The American economic system is based on debt and printing the dollar as a world currency that is always (was?) in demand. Thanks to the Bretton Woods system, the US was able to manage the crisis in this way, but pressure from the BRICS countries seeking to weaken the dollar as a global medium of exchange may change this. The Lummis bill proposal suggests that the Fed’s investment in bitcoin could help reduce national debt in the future by increasing the value of the cryptocurrency.
In the case of an ordinary Smith (or Smith), taking out a loan to invest is a very risky move that I definitely do not recommend. However, in the context of how countries operate, taking out debt to invest in BTC, instead of, for example, social programs that always increase inflation, may pay off. The validity of such actions is confirmed by the case of El Salvador and Bhutan, which actively invest in BTC and generate profits from it.
Will the BTC reserve soon become a global standard?
As we know, Europe (and not only) likes to copy Western trends, so it is almost certain that when the US government approves the previously mentioned bill (act), other countries will follow suit. Dennis Porter, CEO of the Satoshi Act Fund, revealed that at the state level, several governors are considering similar legislation. He confirmed that with the help of his company, several US states will implement their own Bitcoin reserve policies in 2025. In turn, in our backyard, Sławomir Mentzen proposes the introduction of the Polish Strategic Reserve in BTC.
Additionally, I followed Dennis Porter’s profile on X, and it shows that he is very actively working to introduce similar reserves at the state level, not only in the USA. In one of his last tweets, you can read that just 15 hours after he offered help in implementing the Strategic Reserve in Bitcoin, 5 countries contacted him on this matter.
In another tweet you can read that the state of Pennsylvania plans to invest up to 10% of its budget in Bitcoin to diversify its assets and fight inflation.
Recently, I have also increasingly come across information about pension funds investing in Bitcoin. These include the Michigan State Retirement System (SMRS), the Wisconsin State Retirement Fund and the Jersey City Retirement System. Let’s add to this numerous institutional investors and corporations incorporating BTC into their investment strategies. It seems that the dreams of enthusiasts from the previous bull market, where it was loud that institutions were entering the cryptocurrency market, are becoming a reality in this bull market.
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What do experts think?
If Bitcoin were to become a US reserve asset, it could lead to similar moves by other countries, triggering net inflows of hundreds of billions of dollars and pushing BTC to new heights
— Ryan Lee, Chief Analyst at Bitget Research.
Businessman Michael Saylor believes that all of the above will become a fact: the US government will create a strategic reserve based on BTC, and Senator Lummis’ bill will go down in history as “the most important transaction of the 21st century.”
The best way to protect your dollar is to make sure you pay down your debt
– added the executive chairman of MicroStrategy during the Cantor Crypto, Digital Assets & AI Infrastructure conference in Miami.
The next best way to protect your dollar is to make sure that if anyone ever considers a capital asset other than Treasuries, you already own it
– he said, suggesting, of course, that this “ingredient” would be bitcoin.
He further compared the government’s investment in BTC to, for example, the purchase of Louisiana or California and Alaska in the 19th century, a breakthrough that allowed the US to become an empire.
Bitcoin is the manifest destiny of the United States. I think the Trump administration understands that, I think Senator Lummis understands that
– Saylor summed up his expectations.
Mike Novogratz, who gave an interview to Bloomberg TV, has a similar opinion. The president of Galaxy Digital believes that creating a bitcoin reserve would be “smart” and would show that Washington wants to “show the world that we (as the US) will be a technology-first country – a country that focuses on cryptocurrencies, digital assets.”
I think bitcoin is going to $500,000 – it’s a completely different paradigm because it forces every other country (to buy it), some countries are already buying it
– he added, probably referring to El Salvador, which has been collecting bitcoins for several years.
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