“We want all remaining Bitcoin produced in the USA!”
In a post on Truth Social last month, Republican presidential candidate Donald Trump expressed strong support for bitcoin. In the same post, he acknowledged the geopolitical importance of the world's largest cryptocurrency, warning that any policy that seeks to hinder bitcoin will "only help China and Russia." . Trump's statement not only positioned him as the first pro-bitcoin candidate from a major political party but also focused on discussions about classifying bitcoin as a strategic reserve asset.
These discussions are gaining traction in policy circles thanks to bitcoin-friendly political leaders. For example, former presidential candidate Vivek Ramaswamy has been advising President Trump on bitcoin and digital assets since January. Ramaswamy took a unique position in the final weeks of the campaign. by proposing that the dollar be backed by a basket of commodities that, over time, could include bitcoin.
Ramaswamy’s plan is similar to the proposal by independent presidential candidate Robert F. Kennedy, Jr., in which a small percentage of U.S. Treasury bonds “would be backed by hard currency, gold, silver , platinum or bitcoin”. The intention behind Ramaswamy and Kennedy's proposal is to curb inflation by anchoring the dollar to deflationary assets that maintain value over time.
Senator Cynthia Lummis, the “Crypto Queen” of Congress, is another advocate for using bitcoin to improve the nation's finances. In February 2022, she proposed the Federal Reserve diversify the $40 billion in foreign currency it holds on its balance sheet by adding bitcoin. And she continues to see benefits in holding digital currencies as part of the nation's financial portfolio.
Following Trump's post alluding to the growing political importance of bitcoin, I asked Senator Lummis for her views on the discussions surrounding bitcoin as a strategic reserve asset. Senator Lummis seems very interested in this idea. In her words: "bitcoin is an incredible store of value and I certainly see the benefits of our country diversifying its investments."
Trump, Lummis, Kennedy and Ramaswamy represent a new generation of policymakers who are open to bitcoin's potential as a tool for economic management.
So how can the United States leverage a digital commodity like bitcoin to strengthen its financial health and geopolitical position?
Leverage Bitcoin as a strategic reserve asset
To help answer this question, I reached out to Alex Thorn, head of companywide research at Galaxy Digital. Thorn has written extensively about the impact bitcoin could have on the global financial system. And he sees value in the idea of bitcoin as a strategic reserve asset.
“As a global decentralized commodity currency with sound properties, bitcoin is certain to play an increasing role in geopolitics and international trade,” Thorn said. “What started with home computing enthusiasts has escalated into industrial production, institutional portfolios and corporate balance sheets. There is every reason to believe that the bitcoin network layer will expand further to include countries.”
Here's the logic behind Thorn's thinking: Like any scarce commodity—whether oil, gold, or rare earth minerals—countries often engage in fierce competition with each other to gain a share large resources. And as one of the scarcest commodities on planet Earth, there's not much reason to believe bitcoin will be any different, especially if its value continues to rise as many financial analysts expect.
A good example is Jurrien Timmer, global head of macro at Fidelity, who described bitcoin as “ exponential gold ”. If it reached parity with gold's current market capitalization, one bitcoin would cost around $700,000—more than ten times its current value. Such huge profit potential makes sovereign countries want to accumulate bitcoin now instead of waiting for other countries to do it first.
Despite the absence of any coherent bitcoin strategy, the United States is currently leading the digital gold rush. It is the country's largest holder of bitcoin, having confiscated the majority of its bitcoin from illegals over the past decade. The country also boasts the most Bitcoin nodes, hash rate, and market share in the world. And if Trump wins in November, the country will have its first pro-bitcoin president.
These factors put the United States in a strong position to become the Microstrategy of nations, if that is a policy priority for a future administration.
Case study: MicroStrategy and El Salvador
MicroStrategy is a long-standing technology company that languished in the 2010s. But the company quickly regained its footing in August 2020 after announcing that it had begun accumulating bitcoin as a reserve asset. treasury storage.
Since this announcement, MicroStrategy's stock price has increased more than 900% and is now the world's largest holder of bitcoin. The company now owns a total of 226,000 bitcoins—more than the United States or any other country.
Some financial policymakers are now wondering whether MicroStrategy's success can be replicated at the national level. El Salvador serves as an attractive beta test for this strategy.
In 2021, El Salvador President Nayib Bukele declared bitcoin a legal currency and announced that the country would begin purchasing bitcoin as a treasury reserve asset. El Salvador gained about 50% on the amount of bitcoin it bought during the lead-up to the bull market. And President Bukele has stated his intention to hold bitcoin for the long term. In his words : "Of course we won't sell. In the end, 1 BTC = 1 BTC."
Scaling the MicroStrategy Playbook
One way the United States can leverage bitcoin as a strategic reserve asset is to learn from MicroStrategy and El Salvador.
As the largest holder of bitcoin, the United States has had an advantage over other countries in accumulating digital gold. But classifying—and then treating—bitcoin as a strategic reserve asset would push the nation's race for bitcoin to new heights.
As Alex Thorn explains, “Game theory simply shows that adoption by one country requires other countries to consider the same, whether friend or foe.”
That game theory will only accelerate if the United States — the world's wealthiest country and home to global capital — is the first developed nation to begin accumulating bitcoin as a strategic reserve asset. The decision will accelerate the global adoption of bitcoin as a long-term savings tool and a form of digital gold. In this scenario, the United States would enjoy the largest gains among OECD countries due to its first-mover advantage.
Weigh the Pros and Cons
Of course, as with any bold strategy, there are always trade-offs. To better understand the pros and cons of adopting bitcoin as a strategic reserve asset, I reached out to Matthew Pines, a national security fellow at the Bitcoin Policy Institute.
Among the upsides, Pines said the move “could better position the United States against authoritarian adversaries (who may be considering hard asset diversification and their hedging strategies). itself) while signaling that it intends to lead emerging open digital financial networks.”
But among the downsides: “This strategy will face significant challenges, including regulatory hurdles, the introduction of additional uncertainty into the U.S. Treasury market (even if it could serve as gold's substitute for hard assets on national balance sheets) and political opposition could undermine its sustainability.”
Pairing Bitcoin and Stablecoins
However, policymakers can reduce volatility in the US Treasury market by combining a bitcoin adoption strategy with a strong push for dollar-based stablecoins.
Stablecoin providers are now the 18th largest holder of US bonds, holding about $120 billion in US treasuries. To put that number into context, stablecoin providers now hold more US Treasury bonds than some of the US's largest trading partners, including Germany and South Korea. Furthermore, brokerage firm Bernstein predicts that the stablecoin market will grow exponentially over the next decade, reaching a total market capitalization of $3 trillion by 2028.
As former House Speaker Paul Ryan wrote in The Wall Street Journal last month, the USD stablecoin could create unprecedented demand for the US Treasury and even avert a debt crisis . According to Ryan, it is incumbent on US policymakers to see stablecoins for what they are: a generational opportunity to expand dollarization and strengthen Treasury markets.
A comprehensive digital asset strategy is key to achieving this goal. Such a strategy would seek to increase demand for US debt through stablecoins while also strengthening the nation's overall balance sheet through bitcoin.
A strong balance sheet fueled by bitcoin in the early stages of nation-state adoption will only strengthen the resilience of the US economy. And a stronger economy will only increase confidence in Treasury bonds backed by the "full faith and credit" of the U.S. government. With this strategy, policymakers can thus lay the foundation for an unexpected future - where bitcoin and the dollar thrive together.
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