Recent comments from the US government have suggested a Strategic Bitcoin Reserve may be imminent. This would be a world first, pioneered by a major global economy. We discuss if this is a good idea or a big gamble in the article below.
The recent surge in the price of Bitcoin came after the US administration announced the possibility that a Bitcoin strategic reserve is still on the table. Not only would Bitcoin be included, but Ethereum, Solana, XRP, and Cardano would also be included. These caused the market to bounce, not just because of the emergence of these plans but because of the inclusion of previously unmentioned altcoins.
The Crypto Strategic Reserve
According to a post on Truth Social, it is believed that this action will elevate a critical industry. An Executive Order on Digital Assets will be brought in, directed by a Presidential Working Group. This will be made up of experts and industry leaders. The eventual aim is to make the US the crypto capital of the world.
The result was that Bitcoin itself jumped by 11% to $94,164. This was a turnaround for the asset, which had suffered declining values since the start of the year. A look at the Bitcoin price analysis shows the currency hitting its peak as the news broke. However, it has since dropped back down as of Monday morning.
A strategic reserve is a government store of an asset or money held back and used in an emergency. For example, the US has a strategic oil reserve, which it has used during embargos and times when prices have been high. However, this will be the first time a digital asset has been used.
The Crypto Reserve Backlash
Part of this return to post-announcement prices may have been due to the backlash from many who had supported the government’s stance before. This is mainly because the announcement threw up more questions than answers, and a Bitcoin Strategic Reserve will need to be deployed very carefully.
The main questions were how the fund would allocate its budget across tokens. The only clue to this was that Bitcoin and Ethereum would be at the heart of this, suggesting that they are the primary targets for investment. Many believe it will be extremely hard to get clearance for a reserve that holds Bitcoin, never mind the altcoins also mentioned. Bitcoin itself is very volatile, but that at least has the market backing. When it comes to currencies like Cardano and XRP, it is a tall order.
Other questions hung over how the reserve will be funded. Usually, strategic reserves are popular with countries that have large amounts of resources, which the US does. Any surplus revenue from this is then put into strategic reserves. It was also questioned if there is a legal authority to do this.
Finally, many believed that this was just too much of a risk with taxpayers’ dollars. Even those who were prominent figures in the crypto world believe that the new digital strategic reserve, which will be the first of its kind, should not be done with the money of the US people.
What Advantages Could a Crypto Reserve Bring to the US?
While there are many detractors, there are also huge advantages a Bitcoin strategic reserve could bring to the United States. Firstly, it shows widescale acceptance from a major global economy. This will undoubtedly stoke the fires of traditional financial interest. The seeds of this could be seen last year when Bitcoin ETFs were given the go-ahead. This is just taking it one step further.
With the US at the forefront, it could set in motion a new race for global accumulation. Much like the space race did in the past, this could push technology on in its digital format. One LinkedIn comment by prominent figure Ashish Singhal suggested that this was more than just a milestone in the evolution of cryptocurrency. Instead, it stands to redefine global finance and technology.
While it has been proven that alone, cryptocurrency is not the hedge against inflation many predicted it would be, it can still help stabilize the economy. This is because it allows the US to diversify its national reserves into something other than gold and oil. If more traditional assets are not performing, the US will have other forms from which to get liquidity.
All of this is still in the air. It is unknown how the reserve will function, and it is hoped much of this will be cleared up by the end of the week. At least some of the questions above must be answered. Whatever comes of it, crypto is becoming more spoken about in traditional financial matters. This alone must signal that long-term investment, where its short-term volatility is embraced, must be worth it.
Greg Grzesiak is an Entrepreneur-In-Residence and Columnist at Grit Daily. As CEO of Grzesiak Growth LLC, Greg dedicates his time to helping CEOs influencers and entrepreneurs make the appearances that will grow their following in their reach globally. Over the years he has built strong partnerships with high profile educators and influencers in Youtube and traditional finance space. Greg is a University of Florida graduate with years of experience in marketing and journalism.
