What concept does a strategic reserve asset of 1 million BTC represent?
According to statistics from the World Gold Council, as of the third quarter of 2024, the Federal Reserve's total gold reserves reached 8,133.46 tons (approximately $530 billion), firmly maintaining the top position globally. In contrast, 1 million BTC currently has a market value close to $100 billion, accounting for about 19% of the U.S. gold reserve size, which is quite considerable.
Source: World Gold Council
With Trump and an increasing number of institutions/companies and sovereign nations considering establishing 'Bitcoin strategic reserves,' is Bitcoin's 'Fort Knox moment' about to arrive? Can it, like gold, become an important component of the global reserve asset system?
The next decade may be a key time window for this answer to be revealed.
'Strategic reserve assets,' what does it mean?
At the Bitcoin2024 conference held in July 2024, Trump explicitly committed during his speech to 'never sell' the Bitcoin held by the government and future acquisitions, insisting on the concept of 'strategic Bitcoin reserves.'
With Trump's election and the recent appointments of crypto-friendly individuals to key positions such as U.S. Secretary of the Treasury, SEC Chair, and White House crypto czar, the vision of incorporating Bitcoin into U.S. strategic reserves is moving closer to reality.
What exactly is a 'strategic reserve asset'?
Fundamentally, 'strategic reserve assets' are key assets held by national or regional governments to cope with economic fluctuations, financial crises, or geopolitical risks, maintaining national financial stability, economic security, and international competitiveness. These assets typically possess characteristics such as high value and general acceptability, safety and stability, and liquidity.
From the corporate perspective, 'strategic reserve assets' help achieve financial stability, enhance risk resistance, and support long-term growth strategies. Especially in times of economic turmoil, strategic reserve assets often constitute the primary barrier against risks for enterprises.
Traditional strategic reserve assets mainly include:
Gold: Widely recognized as a stable store of value due to its scarcity and anti-inflation ability.
Foreign exchange reserves: Primarily composed of U.S. dollars, reserve currencies constitute important means of supporting international trade and payments.
Special Drawing Rights (SDR): Allocated by the International Monetary Fund (IMF) to supplement official reserves of member countries.
Thus, assets that can become 'strategic reserves' must possess comprehensive advantages such as value stability, global recognition, and convenient circulation. As an emerging digital asset, Bitcoin is gradually meeting these conditions and is starting to be viewed as a potential option beyond gold.
It is worth noting that besides Trump's 'commitment,' on July 31, 2024, U.S. Senator Cynthia Lummis submitted the (Bitcoin Strategic Reserve Act of 2024) to Congress, explicitly requiring 'the U.S. Treasury must purchase 1 million BTC within five years and must hold it for at least 20 years, unless used to repay outstanding federal debt,' and plans to require the Federal Reserve to 'use a certain proportion of net income each year to purchase Bitcoin.'
This plan aims to ensure that the U.S. government holds sufficient Bitcoin over the next twenty years, providing a long-term financial hedging tool for the nation. The bill has been submitted to the U.S. Senate Banking, Housing, and Urban Affairs Committee and needs to be discussed and voted on; once passed by both houses, it will be sent to Trump for signing into law.
Why Bitcoin, beyond gold and foreign exchange?
From the perspective of asset allocation, having more gold reserves is not necessarily better in an absolute sense.
The primary consideration is that gold, as a physical asset, lacks interest or income attributes, and its liquidity yield is also not significant. This is the core reason for Buffett's long-standing cautious attitude toward it—'Gold cannot generate interest payments, thus lacking the compounding effect.'
More critically, gold reserves bear high storage and maintenance costs. For the vast majority of countries, the effective management and security of gold reserves have become a significant financial burden. Taking the Federal Reserve's iconic gold repository 'Fort Knox' as an example, its security investment is astonishing:
Deep in the strategic heartland of the United States in Kentucky, it uses an underground deep-buried structure equipped with heavy reinforced concrete protective walls and an all-weather security system, with a military presence of tens of thousands stationed year-round. This makes gold reserves not only a safety requirement but also a continuous heavy asset fiscal expenditure.
In contrast, the storage cost of Bitcoin is almost negligible. There is no need to occupy physical space or to set up expensive protective facilities; efficient storage management can be achieved simply by relying on secure wallets, multi-signature technology, and decentralized network verification systems.
At the national level, Bitcoin storage expenditures mainly focus on technology and network maintenance, significantly lower than the physical protection costs of gold. This means that even if Bitcoin does not generate direct income, its holding costs are significantly better than those of gold, allowing for greater room for net asset growth.
At the same time, physical gold trading often involves cumbersome processes such as physical delivery, storage, and transportation, which can take days or even weeks. The gold market is often constrained by the time and geographic limitations of the traditional financial system, whereas Bitcoin can be traded around the clock through exchanges, covering the global market.
Outside of gold, foreign exchange reserves (such as euros and yen) are issued by other countries’ fiat currencies, and their value not only depends on the economic conditions of the issuing country but is also more susceptible to geopolitical risks. Bitcoin, with its scarcity, avoids currency policy interventions and the devaluation risks caused by excessive issuance. It allows any holder (whether individual, institution, or sovereign nation) to freely store, transfer, and trade globally.
This decentralized characteristic ensures that Bitcoin is not affected by political and economic interventions; even in times of global turmoil, its value storage function can still play a stable role.
Companies/institutions are becoming BTC 'Pi Xiu.'
Currently, Bitcoin, with a total market value of $2 trillion, is gradually entering the ranks of potential reserve tools due to its features of not requiring physical storage, global circulation, high transparency, and anti-inflation. More and more companies/institutions, and even sovereign nations, are beginning to explore incorporating Bitcoin into their strategic reserve asset systems.
U.S. government: One of the world's largest Bitcoin holders.
Surprisingly, the U.S. government is indeed one of the largest holders of Bitcoin globally. Over the years, through law enforcement actions, it has seized a substantial amount of Bitcoin from cybercriminals, money laundering organizations, and dark web markets, currently holding approximately 200,000 coins, with a market value close to $2 billion.
As the 'most crypto-friendly president' in U.S. history (at least in terms of public statements), whether Bitcoin can be incorporated into the federal reserve asset system during Trump's future four years in office remains to be seen. However, it can be anticipated that the U.S. government's Bitcoin holdings may bid farewell to the frequent selling model and instead explore its long-term strategic value.
El Salvador: Daily investment of 1 BTC
El Salvador, as the first country to establish Bitcoin as legal tender, enacted related legislation as early as September 7, 2021. It then launched the Chivo digital wallet, preloading $30 worth of Bitcoin for each user who downloaded it, integrating Bitcoin into the national economic system and highlighting its firm 'Bitcoinization' route.
Whenever there is a sharp fluctuation in the crypto market, El Salvador's President Nayib Bukele often promptly announces Bitcoin purchases via social media to instill confidence in the market. Currently, El Salvador maintains a daily purchase rhythm of 1 BTC, and under ongoing 'bottom-fishing,' as of December 10, BTC holdings have reached 5,959.77 coins, with a holding value of approximately $577 million.
Although this holding scale is not significant globally, as a small economy, its firm Bitcoin strategy is quite exemplary, providing a unique experimental case for other countries.
All in on Bitcoin by MicroStrategy
Outside of sovereign nations, publicly traded company MicroStrategy is undoubtedly a benchmark in the 'HODL Bitcoin' space—its 'buy and buy' strategy for Bitcoin has long been a bold and clear approach, with its holdings exceeding those of any publicly acknowledged sovereign reserve.
MicroStrategy's first public purchase of Bitcoin dates back to August 11, 2020, spending $250 million to acquire 21,454 coins, with an initial purchase cost of about $11,652 per coin. It then entered a continuous accumulation mode, with the most recent purchase on December 9, acquiring 21,550 coins for about $2.1 billion, with an average price of $98,783 per coin.
As of December 8, 2024, MicroStrategy has cumulatively invested approximately $25.6 billion to acquire 423,650 BTC, with an average price of about $60,324 per coin. Based on the current price of $97,000, the holding has a floating profit of about $15.5 billion.
Tesla's 'Hodl' Bitcoin
On December 20, 2020, following MicroStrategy's Michael Saylor's suggestion for other CEOs to follow suit, Elon Musk first expressed interest in buying Bitcoin. In late January 2021, Musk changed his Twitter bio to #Bitcoin, and Tesla subsequently announced the purchase of $1.5 billion in Bitcoin in February 2021.
Tesla reduced its Bitcoin holdings by 10% in the first quarter of 2021. According to Musk, this move was aimed at 'testing liquidity and verifying the feasibility of Bitcoin as a cash substitute on the balance sheet.'
According to Arkham data, as of the time of writing, Tesla holds 11,509 Bitcoin, with a holding value of approximately $1.1 billion.
Other countries and mainstream enterprises/institutions: Bitcoin reserves are becoming mainstream.
The strategic value of Bitcoin is penetrating from the national level to the corporate and institutional level. National reserve layouts directly influence the policy environment, while enterprises are the core driving force of adoption. Bitcoin is no longer just a hedging tool; it has become a key strategic component of corporate balance sheets.
Recently, tech giants like Microsoft and Amazon have received active proposals from investors calling for the inclusion of Bitcoin in their balance sheets.
Michael Saylor, the founder of MicroStrategy, proposed a Bitcoin investment suggestion to the Microsoft board, believing this move would significantly enhance corporate value and create long-term shareholder returns.
At the same time, the American conservative think tank National Center for Public Policy Research suggests that Amazon allocate 1% of its total assets to Bitcoin to enhance shareholder value and hedge against the devaluation risks of fiat currency.
Incorporating Bitcoin into the balance sheets of mainstream institutions and traditional enterprises can bring the following advantages:
Inflation resistance: The scarcity of a hard cap of 21 million coins endows Bitcoin with strong anti-inflation properties, helping companies stabilize asset value in a global monetary easing environment.
Diversified investment portfolio: As an emerging asset class, Bitcoin enriches corporate asset allocation dimensions, reduces reliance on a single asset, and enhances financial robustness.
Enhancing corporate brand and market image: Holding Bitcoin demonstrates a company’s embrace of innovative technology and future economic models, enhancing market competitiveness and shaping a forward-looking brand image.
However, in the process of incorporating BTC into their balance sheets, companies need to address two key issues: how to securely custody large assets and how to efficiently meet OTC (over-the-counter trading) needs to avoid market impact. This has spurred the vigorous development of professional custody and OTC services to meet the strict requirements of companies for digital asset management.
It is worth noting that with the development of the market, the digital asset service ecosystem is continuously improving. In the custody field, many platforms have begun to adopt independent wallet designs and bankruptcy isolation mechanisms, and have introduced insurance protection to cope with various risks. For example, licensed exchanges in Hong Kong like OSL have collaborated with insurance companies like Canopius to expand the scope of protection to multiple dimensions such as cybersecurity and technical failures. At the same time, in the OTC trading aspect, as a licensed compliance platform, it is providing institutional investors with a more regulated and efficient trading environment through connections with the traditional banking system.
Bitcoin in the next decade: Speculative asset or global strategic reserve?
Bitcoin has jumped from a fringe asset to a global strategic reserve newcomer. From sovereign nations to mainstream institutions/traditional enterprises, more and more forces are redefining its role. Scarcity, decentralization, and high transparency have led it to be hailed as 'digital gold.'
Despite the ongoing controversy over price volatility, the adoption of Bitcoin is advancing with unstoppable momentum. If Trump’s proposal for 'strategic reserve assets' is realized, BTC's status will rival gold, and its strategic significance may surpass that of gold.
While gold has physical scarcity, its distribution and trading depend on complex logistics and regulatory systems. Bitcoin, based on blockchain technology, does not require physical storage or transportation, allowing for borderless rapid circulation, making it more suitable as a national and institutional reserve asset to undertake more strategic responsibilities. This advantage also drives professional service providers like OSL to continuously improve their infrastructure to create a one-stop solution for institutional clients from custody to trading.
In the next decade, the potential of Bitcoin as a global strategic reserve asset will be fully unleashed, and its application scenarios are expected to further expand. From national-level 'long-term HODLing' to corporate/institutional 'buy-and-hold,' Bitcoin's influence continues to expand. Global leaders and top companies like MicroStrategy, Microsoft, and Amazon have become the best ambassadors for Bitcoin, greatly enhancing global market recognition of cryptocurrencies.
'The light boat has passed through ten thousand mountains.' Regardless of whether Bitcoin can become a strategic reserve asset for the U.S. or other countries in the next four years, it has already won a key victory on its adoption journey. As more institutions begin to layout Bitcoin, the construction of professional digital asset financial infrastructure will play an increasingly critical role in the future.
