US states like Ohio, Texas, and Pennsylvania are exploring $BTC as a reserve asset to protect against inflation. However, experts like Nic Carter warn that its volatility could destabilize the global financial system. Despite these risks, Bitcoin’s growing adoption suggests that it could play a larger role in future finance if the government adopts it.
Bitcoin has become an investment and a potential store of value. As governments and states explore new ways to hedge against inflation and economic uncertainty, one of the best ways is through a Strategic Bitcoin Reserve.
Some states in the US consider Bitcoin a reserve asset, which could change the way financial systems operate.
Bitcoin as a Financial Asset
Unlike traditional currencies, Bitcoin is not controlled by any government or central authority. Over the years, Bitcoin has grown as both retail and institutional investors view it as an alternative investment.
Some see Bitcoin as a hedge against inflation, a store of value, and even a potential future currency. Recently, even governments and large corporations are starting to realize Bitcoin’s potential as a reserve.
One of the biggest supporters of Bitcoin is MicroStrategy CEO Michael Saylor. Saylor has purchased around 439,000 Bitcoins for his company’s treasury, worth around $46 billion. This sets a precedent for other companies and governments to consider Bitcoin as a reserve asset.
Strategic Bitcoin Reserve Interest from US States
Ohio recently introduced a "Bitcoin Reserve Fund" proposal that would allow the state to purchase Bitcoin as part of its investment strategy.
Recently, El Salvador and the Central African Republic adopted Bitcoin as official legal tender, while companies like Metaplanet are also adopting Bitcoin reserves as an asset.
This follows other US states such as Pennsylvania and Texas, which have proposed laws to create Bitcoin reserves. In Ohio, House Republican Leader Derek Merrin introduced the Ohio Bitcoin Reserve Act (HB 703) in December 2024.
This bill would protect against the devaluation of the US dollar by authorizing the Ohio State Treasury Department to purchase Bitcoin.
“The US Dollar is rapidly losing value and our State Treasurer should have the authority and flexibility to invest in Bitcoin while determining appropriate asset allocation,” Merrin said.
Bitcoin offers strong potential as a reserve asset due to its deflationary nature, while its fixed supply of 21 million coins makes it a hedge against inflation and provides security and independence from political or banking instability.
Bitcoin also provides diversification for government reserves, reducing reliance on traditional assets.
Risks and Challenges of Bitcoin Reserve
Nic Carter, co-founder of Castle Island Ventures, expressed concerns about the potential adoption of Bitcoin as a strategic reserve asset in an interview on Bloomberg TV.
He argued that such a move could shake global confidence in the US dollar, the most important asset of the current financial system.
"I don't think that's going to happen because it would erode confidence in the dollar and that would be a negative outcome for everyone involved," Carter said.
He also believes that using Bitcoin as a reserve asset could cause more problems than benefits. He noted that Bitcoin's price could be very volatile, which could create problems for the global financial system, which is currently dependent on the stable US dollar.
“This is not a good idea because it could lead to volatility and instability in global markets,” he said. As Bitcoin becomes more popular, it becomes important for policymakers and financial institutions to consider these risks.
As we all know, the main problems with using Bitcoin as a reserve asset is its price volatility. The value of Bitcoin can change dramatically in a short period of time. For example, in 2021, its price went from around $70,000 to around $30,000.
Such price fluctuations make Bitcoin an unstable choice for governments, as it can lead to unexpected losses if its value drops suddenly.
Another issue is the lack of clear regulations around Bitcoin as he mentioned. Recently, the Chairman of the US Federal Reserve, Jerome Powell, said that there is nothing wrong with Bitcoin, there are no laws regulating its use.
So, Powell’s comments suddenly moved the market. This caused the value of Bitcoin to drop from $107.00 to $101.300. So, Bitcoin can be a risky asset for governments because sudden changes in the market can lead to financial instability for investors.
Possible Futures for Bitcoin Reserves
Bitwise CIO Matt said in an interview that Bitcoin will likely surpass $200,000 by December 2025. He highlights three key things that could support the rally: ETFs, public companies like MicroStrategy, and even governments buying Bitcoin.
As Matt puts it, there is “too much demand, not enough supply,” and he believes this will drive up the price. He also argues that we are still in the early stages of this journey.
As he said, “If we get a Bitcoin strategic reserve where the government buys Bitcoin… you’re looking at three, four, even $500,000 worth of Bitcoin.”
Although he still thinks the chances are less than 50%, it could gain momentum, especially with the support of key leaders.
He added that if the US government started holding Bitcoin as a reserve, its price could go up to $300,000 to $500,000. Although this is just an idea.
Some US states, including Ohio, Texas and Pennsylvania, are considering holding Bitcoin as part of their reserves in the hope that it could protect against inflation, but price volatility and a lack of clear rules are major concerns.
