In recent days, rumors have emerged that national states are accumulating significant amounts of bitcoins, and some even suggest coordinated efforts to create a strategic reserve of bitcoins.
Talks about the United States creating a bitcoin reserve were sparked by Cynthia Lummis, a Republican senator from Wyoming. Along with this, an aide to elected President Donald Trump suggested that the country could protect its interests in the cryptocurrency market by creating such a reserve.
There have been discussions about national states increasing their BTC reserves.
These days, international assets are also expanding in several different ways: El Salvador already has 5,931 bitcoins, the United Kingdom owns 61,245 bitcoins seized from criminals, and the USA holds 208,109 bitcoins.
In the context of tightening markets, questions remain about how the government-controlled strategy of acquiring bitcoins will affect the cryptocurrency ecosystem.
If a major country such as China, Russia, Japan, Canada, or the USA acquires significant bitcoin reserves, it could trigger a domino effect. Other countries may feel the need to follow suit, viewing bitcoin (BTC) as an economic asset akin to gold.
The supply of bitcoin, capped at 21 million BTC, will create a scarcity that could attract governments looking to hedge against inflation and economic instability.
In this hypothetical situation, a large acquisition of bitcoin by one or several countries would likely sharply increase the price of bitcoin. Supporters argue that the value of bitcoin could reach millions of dollars per coin if such an event occurs, considering the deflationary nature of the currency and its properties as a 'store of value' that would be derived from national reserves.
As governments continue to buy bitcoin, retail investors and institutions may interpret this as a signal of bitcoin's long-term value. This could follow interest from small states, wealthy individuals, and corporations, creating a cascading demand effect.
Ultimately, the global image of bitcoin may shift from a decentralized peer-to-peer currency (P2P) to a strategic state asset. However, BTC is divisible to eight decimal places, allowing even tiny fractions to be used in P2P transactions.
Such flexibility means that the smallest units of bitcoin can circulate among users and facilitate exchanges, maintaining activity even at the most insignificant levels. However, the fee paid to miners for transactions may soar above the cost of the transaction itself, which is not a problem for states but would practically make it impossible for ordinary users to transfer small amounts.
In the end, one of the main risks in this scenario is the shortage of bitcoins for everyday transactions. If governments accumulate significant amounts of bitcoins, it could lead to a substantial reduction in circulating bitcoins, limiting availability for retail investors and businesses.
By proposing the creation of a state reserve in bitcoins, Donald Trump did not fully appreciate the contagiousness of such a decision for other states. Such a decision by the US government would create a market frenzy and make it impossible to achieve the set goals of forming a reserve of 1 million BTC.
It would be wiser to do this secretly from the public, and then announce it to the world. Because what America does, other countries follow. There won't be enough bitcoin for all countries' state reserves.
