Article reprinted from: Yuliya
What does a strategic reserve asset of 1 million BTC mean?
According to statistics from the World Gold Council, as of the third quarter of 2024, the total gold reserves of the Federal Reserve reached 8,133.46 tons (approximately $530 billion), firmly ranking first in the world. Meanwhile, the current market value of 1 million BTC is close to $100 billion, accounting for about 19% of the U.S. gold reserves, which is quite considerable.
Source: World Gold Council
With Trump and an increasing number of institutions/enterprises and sovereign nations beginning to consider establishing 'Bitcoin strategic reserves', is Bitcoin's 'Fort Knox moment' about to arrive? Will it become an important part of the global reserve asset system, just like gold?
The next ten years may become a critical time window for this answer to be revealed.
'Strategic reserve asset', what does it mean?
At the Bitcoin2024 conference held in July 2024, Trump explicitly promised during his speech to 'never sell' the Bitcoin held by the government and those to be acquired in the future, insisting on the concept of a 'strategic Bitcoin reserve'.
With Trump being elected and the recent appointments of crypto-friendly individuals to key positions such as the U.S. Treasury Secretary, SEC Chair, and White House crypto czar, the idea of incorporating Bitcoin into strategic reserves is closer to reality.
What exactly is a 'strategic reserve asset'?
Fundamentally, 'strategic reserve assets' are key assets held by governments or regions to cope with economic fluctuations, financial crises, or geopolitical risks, maintaining national financial stability, economic security, and international competitiveness. These types of assets typically possess characteristics such as high value and widespread acceptance, safety and stability, and liquidity.
At the corporate level, 'strategic reserve assets' help achieve financial stability, enhance risk resilience, and support long-term growth strategies. Especially during times of economic turmoil, strategic reserve assets often serve as the primary shield for companies against risks.
Traditional strategic reserve assets mainly include:
Gold: Widely recognized as a stable store of value due to its scarcity and anti-inflation capacity.
Foreign exchange reserves: Primarily dollar-based reserve currencies, which constitute important means to support international trade and payments.
Special Drawing Rights (SDR): Allocated by the International Monetary Fund (IMF) to supplement member countries' official reserves.
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 beginning to be regarded as a potential option beyond gold.
Notably, aside from Trump's 'commitment', on July 31, 2024, U.S. Senator Cynthia Lummis submitted the (Bitcoin Act of 2024) to Congress, explicitly requiring that 'the U.S. Treasury must purchase 1 million BTC within 5 years and hold it for at least 20 years, unless used to pay off outstanding federal debt', and plans to require the Federal Reserve to 'use a certain amount of net profits each year to purchase Bitcoin.'
This plan aims to ensure that the U.S. government holds sufficient Bitcoin over the next twenty years, providing the nation with a long-term financial hedging tool. The bill has currently been submitted to the U.S. Senate Committee on Banking, Housing, and Urban Affairs 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, aside from gold and foreign exchange?
From an asset allocation perspective, 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 yield attributes, and its liquidity returns are not significant. This is the core reason for Buffett's long-standing cautious attitude towards it—'gold cannot generate interest payments, hence lacks a compounding effect.'
More critically, gold reserves incur high storage and maintenance costs. For the vast majority of countries, effective management and security of gold reserves have become a significant financial burden. Taking the Fed's iconic gold storage facility 'Fort Knox' as an example, its security investment is astonishing:
Deep in the strategic heartland of the United States in Kentucky, it employs an underground 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 security requirement but also an evolving continuous heavy asset fiscal expenditure.
In contrast, Bitcoin's storage costs are nearly negligible. There is no need to occupy physical space or configure 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 are mainly focused on technology and network maintenance, far lower than the physical protection costs of gold. This means that even if Bitcoin does not generate direct returns, its holding costs are significantly better than gold, leaving more room for net asset growth.
At the same time, physical gold trading often involves complex processes such as physical delivery, storage, and transportation, which can take days or even weeks. The gold market is also often constrained by the time and regional limitations of traditional financial systems, whereas Bitcoin can be traded 24/7 through exchanges, covering global markets.
Beyond gold, foreign exchange reserves (such as euros, yen, etc.) as currencies issued by other countries not only depend on the economic conditions of the issuing country but also are more susceptible to geopolitical risk shocks. Bitcoin, with its scarcity, can avoid monetary policy intervention and the depreciation risks caused by excessive issuance. Furthermore, it allows any holder (whether individual, institution, or sovereign nation) to freely store, transfer, and trade on a global scale.
This decentralized characteristic ensures that Bitcoin is not affected by political and economic interventions; even during global turmoil, its value storage function can remain stable.
Corporations/institutions and sovereign nations are becoming BTC 'Pijiu'.
With a current total market value of $2 trillion, Bitcoin, with its characteristics of not requiring physical storage, global circulation, high transparency, and anti-inflation, is gradually entering the ranks of potential reserve tools. Increasingly, companies/institutions and even sovereign countries are beginning to explore incorporating Bitcoin into their strategic reserve asset systems.
U.S. Government: One of the world's largest Bitcoin holders.
Unexpectedly, the U.S. government is indeed one of the largest Bitcoin holders in the world. Over the years, through law enforcement actions, it has seized large amounts of Bitcoin from cybercriminals, money laundering organizations, and dark web markets, currently holding approximately 200,000 BTC, worth nearly $20 billion.
As the 'most crypto-friendly president in U.S. history' (at least in terms of public statements), it remains to be seen whether Trump’s administration in the next four years will incorporate Bitcoin into the federal reserve asset system. However, it is foreseeable that the Bitcoin held by the U.S. government may bid farewell to the frequent selling model and explore its long-term strategic value.
El Salvador: Daily investment of 1 BTC
El Salvador, as the first country in the world to establish Bitcoin as legal tender, issued relevant legislation as early as September 7, 2021. Subsequently, it launched the Chivo electronic wallet, preloading $30 worth of Bitcoin for each user who downloads it, integrating Bitcoin into the national economic system, and showcasing its firm 'Bitcoinization' path.
Whenever the crypto market experiences severe fluctuations, El Salvador's President Nayib Bukele often first announces Bitcoin purchases via social media, injecting confidence into the market. Currently, El Salvador maintains a daily buying pace of 1 BTC, and with continuous 'bottom fishing', as of December 10, the BTC holding has reached 5,959.77 BTC, with a holding market value of approximately $577 million.
Although this holding scale is not significant globally, as a small economy, its firm Bitcoin strategy is quite demonstrative, providing a unique experimental case for other countries.
All in Bitcoin's MicroStrategy
Beyond sovereign nations, the publicly traded company MicroStrategy undoubtedly serves as a benchmark in the Bitcoin 'hoarding' field—its 'buy, buy, buy' strategy for Bitcoin has long been a major public strategy, and the amount held exceeds any publicly listed sovereign nation's reserves.
MicroStrategy's first public Bitcoin purchase dates back to August 11, 2020, when it spent $250 million to acquire 21,454 BTC, with an initial purchase cost of approximately $11,652 per BTC. Since then, it has entered a continuous accumulation mode, with the most recent purchase on December 9, around $2.1 billion for 21,550 BTC, at an average price of $98,783 per BTC.
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 BTC. Based on the current price of $97,000, the holding has an unrealized gain of about $15.5 billion.
'Hodl' Bitcoin by Tesla
On December 20, 2020, following Michael Saylor of MicroStrategy suggesting other CEOs to follow suit, Elon Musk first expressed interest in purchasing Bitcoin. In late January 2021, Musk changed his Twitter bio to #Bitcoin, and Tesla subsequently announced its 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's explanation, this was aimed at 'testing liquidity and verifying Bitcoin's feasibility as a cash alternative on the balance sheet.'
According to Arkham data, as of the time of writing, Tesla holds 11,509 BTC, with a holding market value of approximately $1.1 billion.
Other countries and mainstream companies/institutions: Bitcoin reserves are moving towards mainstream adoption.
The strategic value of Bitcoin is penetrating from the national level to the corporate and institutional level. National reserve layouts directly affect the policy environment, while enterprises are the core driving force behind adoption. Bitcoin is no longer just a hedging tool but has become a key strategic component of corporate balance sheets.
Recently, tech giants like Microsoft and Amazon have received positive advocacy from investors calling for the inclusion of Bitcoin in their balance sheets.
Michael Saylor, founder of MicroStrategy, proposed Bitcoin investment to the Microsoft board, believing that this move would significantly enhance corporate value and create long-term shareholder returns.
At the same time, the conservative U.S. think tank National Center for Public Policy Research has suggested that Amazon allocate 1% of its total assets to Bitcoin to enhance shareholder value and hedge against fiat currency depreciation risks.
Mainstream institutions and traditional companies incorporating Bitcoin into their balance sheets can bring the following advantages:
Anti-inflation capability: The scarcity of the capped 21 million BTC endows it with strong anti-inflation properties, helping enterprises stabilize asset value in a global monetary easing environment.
Diversified investment portfolio: As an emerging asset class, Bitcoin enriches the dimensions of corporate asset allocation, reducing reliance on a single asset and enhancing financial robustness.
Enhancing corporate brand and market image: Holding Bitcoin demonstrates the 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 amounts of assets and how to efficiently complete OTC (over-the-counter) transactions to avoid market impact. This has led to the vigorous development of professional custody and OTC services to meet the strict requirements for digital asset management by enterprises.
It is worth noting that as the market develops, the digital asset service ecosystem is also continuously improving. In the custody sector, many platforms are beginning to adopt independent wallet designs and bankruptcy isolation mechanisms, and introducing insurance coverage to address various risks. For example, licensed exchanges like Hong Kong's OSL have collaborated with insurance companies like Canopius to expand coverage to various dimensions, including cybersecurity and technical failures. Meanwhile, in OTC trading, as a licensed compliant platform, they are providing institutional investors with a more standardized and efficient trading environment through integration with traditional banking systems.
The next decade for Bitcoin: speculative asset or global strategic reserve?
Bitcoin has jumped from a fringe asset to a new star of global strategic reserves. From sovereign nations to mainstream institutions/traditional enterprises, an increasing number of forces are redefining its role. Its scarcity, decentralization, and high transparency have earned it the title of 'digital gold.'
Despite ongoing debates about price volatility, Bitcoin's adoption is advancing with unstoppable momentum. If Trump's proposed 'strategic reserve asset' concept materializes, BTC's status may rival gold, and its strategic significance may surpass that of gold.
Although gold has physical scarcity, its distribution and trading rely on complex logistics and regulatory systems. Bitcoin, relying on blockchain technology, does not require physical storage and transportation, allowing for rapid borderless circulation, making it more suitable as a reserve asset for countries and institutions to assume more strategic responsibilities. This advantage has also driven professional service providers like OSL to continuously improve their infrastructure, creating one-stop solutions 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 expand further. From national-level 'long-term coin hoarding' to corporate/institutional 'buy and hold', the influence of Bitcoin continues to expand. Global leaders, along with MicroStrategy, Microsoft, Amazon, and other leading companies, have become the best spokespersons for Bitcoin, significantly enhancing global market recognition of cryptocurrencies.
'The light boat has passed through ten thousand mountains.' Whether Bitcoin can become a strategic reserve asset for the U.S. or other countries in the next four years remains to be seen, but it has already won a key victory on its adoption journey. As more institutions position themselves in Bitcoin, the construction of professional digital asset financial infrastructure will play a more critical role in the future.
