In late November 2024, Bitcoin hit the long-anticipated $100,000 USD milestone. Beginning the year at just over $42,000 USD, the months-long rally that preceded this new high could signal the next phase of a bull run for Bitcoin, according to many analysts.¹

Additionally, Bitcoin and the cryptocurrency industry got some added wind in their sails with news that President-elect Donald Trump will choose Paul Atkins to head the SEC.

Unlike outgoing SEC chairman Gary Gensler, long seen as a cryptocurrency skeptic, Atkins has made clear that he wants clear, common sense regulation of cryptocurrencies that doesn’t stifle innovation, and many experts expect Atkins to take an overall more favourable view of U.S. Bitcoin policy during the next administration.²

Along with the pro-crypto news of Atkins, Trump also appointed David Sacks to the first ever White House AI and Crypto role. David Sacks, a longtime venture capitalist who worked with Musk at PayPal more than two decades ago, is a big advocate for crypto. In this role, Sacks will focus on developing a clear legal framework for the cryptocurrency industry, safeguarding free speech online, and positioning the U.S. as a global leader in AI and crypto innovation.

Given the United States’ evolving relationship with digital assets, why would now be the right time to establish a Strategic Bitcoin Reserve, what would such a stockpile mean for the economics of Bitcoin, and how could U.S. leadership pave the way for similar moves by other countries and multinational corporations?

Let’s examine all these questions with an eye to Bitcoin’s increasingly important role as a global financial asset.

A Strategic Stockpile: Why Bitcoin?

Strategic stockpiles are nothing new. Many countries hold reserves of critical assets as a hedge against future shortages or uncertainty.

The United States already controls several strategic reserves. Most famous is the Strategic Petroleum Reserve (SPR), which began in 1974 and is administered by the U.S. Department of Energy. This 600-million-barrel stockpile of crude oil is meant to reduce the impact of disruptions in the fuel supply. From time to time, the U.S. government will release a percentage of this reserve to the open market to ease both price and supply concerns, with proceeds going to the U.S. Treasury.³

The United States government controls similar strategic reserves for grain, gold, foreign currency, and even cheese.

With such reserves in mind, in July 2024, Senator Cynthia Lummis introduced the Boosting Innovation, Technology and Competitiveness through Optimized Investment Nationwide (BITCOIN) Act in the U.S. Senate. This bill, if passed, would establish a Strategic Bitcoin Reserve “to serve as an additional store of value to bolster America’s balance sheet and ensure the transparent management of Bitcoin holdings of the federal government.”

Modelled heavily on the U.S. strategic gold reserve, a Bitcoin reserve, as proposed in this bill, would mandate the U.S. government to acquire a total stake of approximately 5% of the total Bitcoin supply (equivalent to the size of gold holdings by the U.S. government), cap purchases of Bitcoin by the federal government at 200,000 BTC per year, order that all Bitcoin purchased through this program be held for a minimum of 20 years, and restrict sale or use of Bitcoin solely to payment of the federal debt.⁴

So why consider a Strategic Bitcoin Reserve?

In addition to ensuring the transparent management of U.S. government Bitcoin holdings, proponents of a Bitcoin reserve see it as a potential panacea for the U.S. debt crisis. With the federal debt now north of $35 trillion and growing by $2.6 trillion per year,⁵ leveraging Bitcoin’s deflationary properties and limited supply can serve as a long-term hedge against inflation. Bitcoin’s decentralization and portability can act as a diversification away from fiat currency holdings and as protection against currency debasement.⁶

While it may not be possible to wipe out the federal debt by selling holdings from a Strategic Bitcoin Reserve, such sales could make a dent in the debt or the cost of servicing it. Don’t forget that income from such sales goes back to the Treasury, and such income can be substantial. A mandated sale of 9.85 million barrels of oil from the SPR in 2019, for example, raised $566.6 million in revenue for Uncle Sam.⁷

Leading by Example

Should the U.S. implement a Strategic Bitcoin Reserve, it would likely spur similar actions by other nations, particularly as they mitigate risks associated with being left behind in an increasingly digital global economy.

El Salvador’s move in 2021 to adopt Bitcoin as legal tender and accumulate reserves has already highlighted the currency’s potential benefits. To date, El Salvador has reported more than $333 million in profits from its relatively modest sovereign holdings of 6,000 BTC.⁸

With the network issuing 3.125 BTC per block every ten minutes, the current annual issuance of roughly 165,000 BTC stands in stark contrast to the mandate proposed in the BITCOIN Act, whereby the United States would acquire up to 200,000 BTC annually. This mismatch between block rewards and sovereign demand would drive upward pressure on Bitcoin prices, reinforcing its viability as a global reserve asset. This effect would only increase over time, as the Bitcoin block reward continues to be halved.

Corporate Adoption: The Microsoft Question

In addition to possible government adoption, what are the chances of more corporate investment in Bitcoin as a portion of held assets? There are already signs that things are moving in this direction.

For example, Microsoft’s shareholder vote on adding Bitcoin to its holdings signals a potential shift among major corporations. While the board has recommended voting against the proposal, shareholder interest reflects a growing recognition of Bitcoin as a viable treasury asset.⁹

Similar to its attractions for governments, for corporations Bitcoin offers a hedge against macroeconomic risks, including inflation and currency devaluation. If corporate giants like Microsoft begin holding Bitcoin, it could spur a domino effect among other Fortune 500 firms, further bolstering Bitcoin’s adoption and legitimacy. This would also increase Bitcoin’s market capitalization, increasing its suitability as a reserve asset for nations.

Summary

As Bitcoin reaches new highs and gains institutional support, discussions about a U.S. Strategic Bitcoin Reserve highlight the digital currency’s growing role in the global financial system. Such a reserve could redefine Bitcoin’s position from a speculative asset to a cornerstone of national strategy. Whether driven by nations or corporations, Bitcoin’s trajectory points toward deeper integration into traditional financial structures, marking a pivotal moment in its evolution.

Investing in Cryptocurrency with ETFs

Deciding which cryptocurrency to own and how much to allocate can be overwhelming for many investors. This is why ETFs present an interesting way to gain direct exposure to physical crypto. ETFs offer a simple and secure way to invest in Bitcoin without the need to manage wallets, private keys, or navigate cryptocurrency exchanges.

Evolve’s Bitcoin ETF (EBIT ETF) is one of the world’s first Bitcoin ETFs. It provides investors with a simple and efficient way to access the price of physical Bitcoin through a secure investment solution. For more information on this fund, visit evolveetfs.com/ebit/.

Evolve’s Ether ETF (ETHR ETF) is the world’s first Ether ETF and offers a great way for investors to access the price of Ether through a secure investment solution. For more information on this fund, visit evolveetfs.com/ethr/.

For a more diversified cryptocurrency investment solution, the Evolve Cryptocurrencies ETF (ETC ETF) is Canada’s first multi-crypto ETF. ETC ETF is designed to be a one-ticket solution to cryptocurrency exposure. It is market cap weighted and rebalanced monthly. It currently holds Bitcoin (TSX: EBIT) and Ether (TSX: ETHR), but as regulators approve other crypto ETFs, they may be added as well. For more information on this fund, visit evolveetfs.com/etc/.

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Sources

1. Holmes, F., “Analysts See $200,000 Bitcoin by 2025 as Adoption Spikes,” U.S. Global Investors, December 9, 2024; https://www.usfunds.com/resource/analysts-see-200000-bitcoin-by-2025-as-adoption-spikes/
2. Hollerith, D., “Crypto is getting the SEC boss it wanted in Paul Atkins,” Yahoo Finance, December 5, 2024; https://finance.yahoo.com/news/crypto-is-getting-the-sec-boss-it-wanted-in-paul-atkins-090029838.html
3. “History of SPR Releases,” U.S. Department of Energy, n.d.; https://www.energy.gov/ceser/history-spr-releases
4. “The Impact of a U.S. Strategic Bitcoin Reserve,” River Learn, n.d.; https://river.com/learn/strategic-bitcoin-reserve/
5. “Federal Debt: Total Public Debt,” Fred Economic Data, December 3, 2024; https://fred.stlouisfed.org/series/GFDEBTN
6. Patairya, D.K., “Is Bitcoin a hedge against inflation?,” Cointelegraph, April 03, 2022; https://cointelegraph.com/explained/is-bitcoin-a-hedge-against-inflation
7. “History of SPR Releases,” U.S. Department of Energy, n.d.; https://www.energy.gov/ceser/history-spr-releases
8. Holmes, F., “Analysts See $200,000 Bitcoin by 2025 as Adoption Spikes,” U.S. Global Investors, December 9, 2024; https://www.usfunds.com/resource/analysts-see-200000-bitcoin-by-2025-as-adoption-spikes/
9. Das, A., “Microsoft Set to Vote on Whether to Add Bitcoin to Its Treasury,” Brave New Coin, October 30, 2024; https://bravenewcoin.com/insights/microsoft-set-to-vote-on-whether-to-add-bitcoin-to-its-treasury

Source: Getty Images Credit: BlackJack#D

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