{"id":1505596,"date":"2024-12-02T18:25:00","date_gmt":"2024-12-02T23:25:00","guid":{"rendered":"https:\/\/bugaluu.com\/news\/?p=1505596"},"modified":"2024-12-02T18:25:00","modified_gmt":"2024-12-02T23:25:00","slug":"us-bitcoin-reserve-is-possible-but-not-without-downsides","status":"publish","type":"post","link":"https:\/\/bugaluu.com\/news\/us-bitcoin-reserve-is-possible-but-not-without-downsides\/1505596\/","title":{"rendered":"US Bitcoin Reserve Is Possible, But Not Without Downsides"},"content":{"rendered":"

US Bitcoin Reserve Is Possible, But Not Without Downsides<\/span><\/p>\n

\n

Authored by Stephen Katte via CoinTelegraph.com,<\/em><\/a><\/p>\n

During his 2024 election campaign, United States President-elect Donald Trump made many crypto-related promises, including establishing a \u201cstrategic Bitcoin stockpile.\u201d The idea has since picked up steam both in the United States and abroad.\u00a0<\/p>\n

<\/a><\/p>\n

While there has been plenty of talk, a clear roadmap and timeline for the implementation of a Bitcoin strategic reserve haven\u2019t been hashed out by lawmakers yet.\u00a0<\/p>\n

Speaking to Cointelegraph, Tim Ogilive, global head of institutional at crypto exchange Kraken, said at its core, establishing a\u00a0strategic Bitcoin reserve<\/a>\u00a0is a \u201cstraightforward process.\u201d<\/p>\n

<\/a><\/p>\n

Source:\u00a0<\/em>Michael Saylor<\/em><\/a><\/p>\n

\u201cA sovereign buys Bitcoin and secures it with a qualified custodian. This parallels how governments manage other strategic reserves, like gold in Fort Knox or oil in national stockpiles,\u201d he said.<\/em><\/p>\n

\u201cBitcoin\u2019s digital nature doesn\u2019t change this fundamental principle \u2014 commodity reserves require the proper infrastructure and expertise for storage and security,\u201d <\/strong>Ogilive added.<\/em><\/p>\n

According to Ogilive, El Salvador and Bhutan have already \u201cproven that a reserve is feasible,\u201d showing that the primary barriers to setting it up are not \u201ctechnical or market-driven.\u201d<\/p>\n

In 2021, El Salvador\u00a0adopted Bitcoin as a legal tender<\/a>\u00a0and bought about 200 coins. The country has since increased its holdings to 5,942 Bitcoin as of November, worth $571.6 million at current prices.\u00a0<\/p>\n

Bhutanese officials confirmed in 2024 that the kingdom\u00a0had been mining Bitcoin since April 2019<\/a>\u00a0and still holds about 12,206 Bitcoin, after selling 367 on Nov. 15, worth about $117.9 million at current prices.\u00a0<\/p>\n

A Bitcoin reserve is not without drawbacks<\/h2>\n

In July, US Senator Cynthia Lummis\u00a0introduced<\/a>\u00a0a bill to establish a Bitcoin strategic reserve. Pennsylvania lawmakers also\u00a0introduced legislation in the state\u2019s House of Representatives<\/a>\u00a0to permit its treasury to hold up to 10% in Bitcoin.<\/p>\n

Polish presidential candidate S\u0142awomir Mentzen has\u00a0vowed to create a Bitcoin reserve<\/a>\u00a0if he wins next year\u2019s election. A newly proposed bill in Brazil\u2019s Congress is also aimed at establishing a sovereign federal Bitcoin reserve.\u00a0<\/strong><\/p>\n

<\/a><\/p>\n

Source:\u00a0<\/em>S\u0142awomir Mentzen<\/em><\/a><\/p>\n

Along with the positives of the concept, such as a Bitcoin reserve being a hedge against inflation and the growth value possibly helping reduce debt, there are also concerns.\u00a0<\/p>\n

A few drawbacks that have been flagged are the\u00a0volatility of the market<\/a>\u00a0eroding the value of the reserve, storing the Bitcoin securely so it isn\u2019t hacked or stolen and keeping any\u00a0private keys so they aren\u2019t lost<\/a>.\u00a0<\/p>\n

Ogilive says another potential issue may be\u00a0the concentration of ownership<\/a>. If a government such as the US started accumulating large amounts of Bitcoin, it could \u201cinitially concentrate ownership.\u201d\u00a0<\/p>\n

In the long run, though, Ogilive thinks it could ultimately bolster Bitcoin\u2019s long-term narrative as the \u201cpremier store of value\u201d.<\/p>\n

Timothy Cradle, chief compliance officer at cross-border blockchain payment service Instarails, told Cointelegraph that while a Bitcoin reserve is possible, he is unsure if government involvement in crypto would be without hiccups.<\/p>\n

Governments haven\u2019t always\u00a0made outcomes for the crypto industry<\/a>, with the US Securities and Exchange Commission (SEC) under the Biden administration\u00a0causing<\/a>\u00a0plenty of headaches for crypto firms\u00a0with record numbers of fines and penalties<\/a>\u00a0in 2024.\u00a0<\/p>\n

\u201cIf the US government holds Bitcoin, then it takes an interest in the price of Bitcoin, which further means it will implement policies to manipulate the price, up or down, at times when it needs to do so,\u201d <\/strong>Cradle said.<\/em><\/p>\n

\u201cIf you go back to as recently as 2022, President Joe Biden released 200 million barrels of oil from the strategic petroleum reserve to mitigate price spikes caused by the Russian invasion of Ukraine.\u201d<\/em><\/p>\n

Cradle speculates that with a strategic Bitcoin reserve, the president might unilaterally drop the price of Bitcoin in the same way.\u00a0<\/p>\n

\u201cI would also be curious how they decide to fill the reserve,\u201d he said.<\/em><\/p>\n

\u201cIf, as has been discussed, they choose to withhold Bitcoin seized and held by the US Marshals Service, this could create a perverse incentive to seize more over time and be more aggressive in seizures,\u201d Cradle added.<\/em><\/p>\n

The US government already holds about 213,297 Bitcoin worth over $2 billion, acquired through seizures, with the largest portion coming from\u00a0shutting down the online the Silk Road<\/a>\u00a0black market in 2013.\u00a0<\/p>\n

According to CoinGecko, governments around the world\u00a0hold<\/a>\u00a0about 2.2% of Bitcoin\u2019s total supply, some 471,380 Bitcoin.\u00a0<\/p>\n

<\/a><\/p>\n

Governments around the world are collectively one of the largest Bitcoin holders. Source: CoinGecko<\/em><\/p>\n

Accumulating more Bitcoin for the reserve could prove tricky.\u00a0According<\/a>\u00a0to the Blockchain Council, more than 19.7 million Bitcoin have been awarded to miners in block rewards.\u00a0<\/p>\n

Bitcoin\u2019s pseudonymous creator Satoshi\u00a0Nakamoto\u2019s white paper<\/a>\u00a0dictates that only 21 million are available, meaning most are already in circulation.<\/p>\n

Cradle said that while the idea of a Bitcoin reserve is feasible, he doubts it will happen soon because there doesn\u2019t appear to be a clear rationale for the US government.<\/p>\n

He agrees that a possible upside could include safeguarding economic stability and enhancing national security through financial independence, but \u201cif or how well Bitcoin supports these outcomes remains to be seen.\u201d<\/p>\n

\u201cAt best, I would expect an executive order to explore the possibility of establishing a reserve and a final report by the end of the year with a definitive recommendation,\u201d <\/em><\/strong>Cradle added.<\/p>\n

Bitcoin reserve roadmap doesn\u2019t exist yet\u00a0<\/h2>\n

A growing list of firms have taken the plunge and\u00a0added Bitcoin to their balance sheets<\/a>\u00a0this year, including\u00a0YouTube alternative Rumble<\/a>, artificial intelligence company Genius Group and Japanese investment firm Metaplanet.\u00a0<\/p>\n

Michael Saylor\u2019s MicroStrategy tops the list with 386,700 Bitcoin, worth about $37 billion,\u00a0according<\/a>\u00a0to the firm\u2019s portfolio tracker.<\/p>\n

<\/a><\/p>\n

MicroStrategy has been steadily acquiring more Bitcoin for its stash, which is now worth over $37 billion. Source: Saylor Tracker<\/em><\/p>\n

Steven Lubka, head of private clients at the Bitcoin platform Swan Bitcoin, told Cointelegraph that a government looking to create a Bitcoin reserve would have a few options.\u00a0\u00a0<\/p>\n

\u201cIt can be a stockpile where they just hold the Bitcoin they already have. This can be done with the stroke of a pen by the president. It is the easiest form,\u201d <\/strong>he said.<\/em><\/p>\n

\u201cSecond, you can have a reserve where the US actively buys Bitcoin below a certain size; this can also be done by the executive easily above a certain size, meaning above a certain amount of purchases per year, you do need congressional buy-in,\u201d Lubka added.\u00a0<\/em><\/p>\n

According to Lubka, a Bitcoin reserve has minimal downsides, numerous benefits and could become a reality since a number of pro-crypto candidates were elected to the US Congress.\u00a0<\/p>\n

Hundreds of pro-crypto candidates won seats in Congress, and industry leaders have suggested the US government will become the\u00a0most pro-crypto in history<\/a>, which should result in a more favorable regulatory environment.\u00a0<\/p>\n

\u201cThe upsides of a reserve are that it stabilizes the US balance sheet. It allows the US in times of treasury market dysfunction or war to not be taken out by its adversaries, impairing the functioning of its debt market,\u201d<\/strong> he said.\u00a0<\/em><\/p>\n

\u201cThis is an important strategic option for the country and one that most people discount. I think the downsides are minimal. This isn’t a lot of money for the US. It costs us almost nothing,\u201d Lubka added.\u00a0<\/em><\/p>\n

Bitcoin reserves a forward-thinking approach\u00a0<\/h2>\n

Bil Qian, chairman of crypto investment firm Cypher Capital, told Cointelegraph that a strategic Bitcoin reserve isn\u2019t only feasible \u2014 it\u2019s a forward-thinking approach that \u201caligns with the evolving global financial landscape.\u201d<\/p>\n

An October report from crypto financial service MatrixPort found that\u00a0global cryptocurrency adoption is approaching<\/a>\u00a0a significant milestone, with 7.51% of the world\u2019s population now using digital currencies.\u00a0<\/p>\n

\u201cTop VCs involved in blockchain have long seen the strategic importance of Bitcoin for sovereign nations, leading places like Abu Dhabi to launch a reserve through its sovereign wealth fund back in 2022,\u201d <\/strong><\/em>Qian said.<\/p>\n

\u201cAs sovereign nations and publicly listed companies continue to enter the market, Bitcoin\u2019s value proposition will only strengthen, likely resulting in significant price appreciation,\u201d he added.\u00a0<\/p>\n<\/div>\n

Tyler Durden<\/a><\/span>
\nMon, 12\/02\/2024 – 13:25<\/span><\/p>\n

\u200bhttps:\/\/www.zerohedge.com\/crypto\/us-bitcoin-reserve-possible-not-without-downsides<\/a>\u00a0<\/p>\n","protected":false},"excerpt":{"rendered":"

US Bitcoin Reserve Is Possible, But Not Without Downsides Authored by Stephen Katte via CoinTelegraph.com, During his 2024 election campaign, United States President-elect Donald Trump…<\/p>\n","protected":false},"author":0,"featured_media":1505597,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[1],"tags":[],"class_list":["post-1505596","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-news","wpcat-1-id"],"_links":{"self":[{"href":"https:\/\/bugaluu.com\/news\/wp-json\/wp\/v2\/posts\/1505596","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/bugaluu.com\/news\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/bugaluu.com\/news\/wp-json\/wp\/v2\/types\/post"}],"replies":[{"embeddable":true,"href":"https:\/\/bugaluu.com\/news\/wp-json\/wp\/v2\/comments?post=1505596"}],"version-history":[{"count":0,"href":"https:\/\/bugaluu.com\/news\/wp-json\/wp\/v2\/posts\/1505596\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/bugaluu.com\/news\/wp-json\/wp\/v2\/media\/1505597"}],"wp:attachment":[{"href":"https:\/\/bugaluu.com\/news\/wp-json\/wp\/v2\/media?parent=1505596"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/bugaluu.com\/news\/wp-json\/wp\/v2\/categories?post=1505596"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/bugaluu.com\/news\/wp-json\/wp\/v2\/tags?post=1505596"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}