Written by: Luke, Mars Finance
Recently, Bitcoin has once again become the focus of attention in the financial community: the Pennsylvania House of Representatives formally proposed the (Pennsylvania Bitcoin Strategic Reserve Act), proposing to allocate 10% of the state treasury's approximately $7 billion in funds to Bitcoin to cope with inflation and optimize the investment portfolio. At the same time, U.S. Senator Cynthia Lummis presented a more ambitious proposal to Congress, proposing the establishment of a "Bitcoin Reserve" operated by the Treasury Department and the purchase of up to 1 million Bitcoins in the next five years. Trump also stated at the Bitcoin Conference on July 28 that if elected president in November, he would push the United States to establish a "strategic Bitcoin reserve" and prevent the U.S. government from selling existing Bitcoin reserves. Michael Saylor further emphasized at the Cantor Crypto Conference in Miami that Bitcoin is an asset without counterparty risk and that "strategic Bitcoin reserves will be the greatest deal of the 21st century." He believes that if the United States implements a strategic reserve, other countries will have to follow suit.
This is indeed the case: not only the United States, but more and more countries and institutions around the world are beginning to seriously consider including Bitcoin in their strategic reserves. According to the latest report from Bitwise Europe, optimism about US policy initiatives and tightening Bitcoin supply are jointly driving up Bitcoin prices. Betting activity on Polymarket also reflects the sharp rise in market expectations for the establishment of national Bitcoin reserves. On the corporate side, companies such as MicroStrategy continue to buy large amounts of Bitcoin, further consolidating this trend.
Changpeng Zhao (CZ), former CEO of Binance, publicly stated: "Countries will compete to list Bitcoin as a reserve asset in the next few years, and no country wants to be the last to take action." From the US government's legislative attempts to corporate asset allocation trends, Bitcoin's position as the "digital gold" of the global financial system has become increasingly consolidated. Globally, the total number of Bitcoins held by governments, institutions and companies exceeds 2,669,855, accounting for 12.7% of the total supply of Bitcoin.
Why do countries and companies choose Bitcoin as a reserve asset? Is this a simple investment strategy or a redefinition of the future monetary order?
Enterprises’ Bitcoin Path: Diverse Strategic Considerations and Layouts
As of 2024, the total amount of Bitcoin held by global companies has exceeded 1.3 million, accounting for 6.2% of the total supply of Bitcoin. These companies cover a variety of fields such as technology giants, mining companies and fintech companies.
MicroStrategy is far ahead with 331,200 bitcoins, accounting for 1.577% of the total supply of bitcoin. Since 2020, the company has continued to increase its holdings of bitcoin, with cumulative investments exceeding $16.5 billion. Its executive chairman, Michael Saylor, has repeatedly publicly stated that Bitcoin is the "safest asset" that can effectively hedge against inflation and protect the value of the company's reserve assets.
Tesla was one of the "huge pumps" in the last bull market. In early 2021, Tesla announced the purchase of $1.5 billion worth of Bitcoin, which attracted widespread attention from the global market. Although some of its Bitcoin assets were subsequently cashed out, Tesla currently still holds 9,720 Bitcoins, demonstrating its confidence in Bitcoin as a long-term asset allocation tool.
Square (now Block, Inc.) sees Bitcoin as an important part of its payment and financial ecosystem. Currently, Block holds 8,211 Bitcoins with a total investment of more than $240 million. The company's chief financial officer, Amrita Ahuja, once said: "Bitcoin is not only part of asset management, but also a continuation of our mission to promote economic empowerment and technological innovation."
In addition, mining companies and trading platforms also occupy an important position in Bitcoin holdings. For example, Marathon Digital Holdings holds 25,945 Bitcoins, mainly from its mining business. Coinbase, one of the world's largest cryptocurrency trading platforms, holds about 9,000 Bitcoins to provide liquidity support for the platform's reserves.
Just today, artificial intelligence company Genius Group also announced that it would convert most of its reserve assets into Bitcoin. The company purchased 110 Bitcoins for $10 million, an average of about $90,932 per coin. The move is part of its strategy to hold more than 90% of its current and future reserves in Bitcoin, with an initial target of $120 million.
The motivations behind these companies' choice to hold Bitcoin are varied, including hedging against economic fluctuations, improving asset returns, participating in the digital economic ecosystem, etc. From a global perspective, companies' attention to Bitcoin does not only stop at short-term investment returns, but also reflects the strategic layout of the future currency and financial system.
1. Hedge against inflation risk
Against the backdrop of continued global monetary easing, inflation expectations are rising, and many companies' cash reserves are facing the risk of shrinking purchasing power. For example, MicroStrategy, one of the earliest companies to purchase Bitcoin on a large scale, currently holds about 330,000 Bitcoins, with a total investment of more than US$4.9 billion, and its average purchase price is US$49,874 per Bitcoin. As of November 2024, its overall investment return has exceeded 80%. Michael Saylor, the company's executive chairman, said they chose Bitcoin because they believe it can protect wealth from the erosion of fiat currency depreciation.
According to data provided by the International Monetary Fund (IMF), the average annual inflation rate of major economies around the world has been about 5% since 2021, while the price of Bitcoin has risen by more than 300% during the same period. This growth rate shows that Bitcoin has become an important choice for companies to cope with inflation.
2. Asset Diversification
Traditionally, companies' reserve assets are usually dominated by cash and short-term bonds, but in the context of an increasingly complex global economic environment, Bitcoin is gradually becoming an effective means for companies to diversify their assets and help enhance financial flexibility. Tesla is such an example. It purchased $1.5 billion in Bitcoin in early 2021 and still held 9,720 in mid-2024. Although Bitcoin's price fluctuations have brought certain financial challenges, Tesla CEO Elon Musk believes that Bitcoin's long-term return rate is much higher than traditional asset allocation. As mentioned in the company's financial report, "The addition of Bitcoin allows us to manage cash assets more flexibly while obtaining potential high returns."
This strategy is not uncommon among companies. According to treasuries.bitbo.io, there are currently 92 companies in the world holding Bitcoin, with a total of more than 2.6 million Bitcoins, accounting for 12.7% of the total supply of Bitcoin. These data show that asset diversification strategies are being favored and practiced by more and more companies.
3. Technological innovation and brand image: standing at the forefront of the times
For many companies, holding Bitcoin is not only an investment, but also a way to demonstrate corporate technological innovation and values. By supporting decentralized technology and the digital economy, these companies have demonstrated their commitment to the future. Block, Inc. holds 8,211 Bitcoins, with a total investment of approximately $240 million. The company promotes the development of Bitcoin payment technology, and its payment platform Cash App allows users to directly purchase and hold Bitcoin. This strategic choice helps to enhance the company's technological image among young users, while demonstrating its determination to promote the development of new economic technologies through practice.
The public is also generally positive about companies that hold Bitcoin. According to a survey, more than 50% of millennial consumers prefer to support companies that "value digital assets and blockchain technology." For technology companies, this strategy obviously helps to enhance the brand image and attract young user groups.
4. Core reason: potential high returns
Bitcoin's long-term growth potential makes it an important choice for companies to realize asset appreciation. After all, companies are first oriented to make money. Despite the volatility of Bitcoin prices, Bitcoin has grown at an average annual rate of more than 100% over the past decade. Marathon Digital Holdings currently holds 25,945 Bitcoins, with a total investment of more than $800 million. Fred Thiel, the company's CEO, said that while Bitcoin's volatility brings risks, it also provides unprecedented growth opportunities. They firmly believe that by holding Bitcoin, the company will create huge value for shareholders in the coming years.
Historical data shows that the price of Bitcoin has increased more than 200 times since 2013, far exceeding the return rate of the S&P 500 index over the same period. Despite short-term volatility, the long-term appreciation potential has formed a huge attraction for companies.
Sovereign States: The Motives Behind Bitcoin Strategic Reserves
In recent years, in addition to companies actively incorporating Bitcoin into their asset allocation, some countries have also begun to try to use Bitcoin as part of their national strategic reserves. On November 10, David Bailey, CEO of (Bitcoin) Magazine, revealed on a social platform: "At least one sovereign state is actively acquiring Bitcoin and has become one of the top five Bitcoin holders in the world. I hope we will hear from them soon." This statement has aroused widespread attention from the outside world to the situation of sovereign states holding Bitcoin.
At present, many governments around the world, including the United States, China and Russia, are actively or indirectly involved in the holding of Bitcoin. The United States is currently the country with the largest number of Bitcoins in the world, with a reserve of 207,189. These assets mainly come from confiscations and seizures in law enforcement actions. The current value is about 18.87 billion US dollars, accounting for 0.987% of the total supply of Bitcoin. In the future, if Trump's bill is passed, the United States will also take the initiative to establish Bitcoin reserves.
China ranks second with 194,000 Bitcoins, valued at approximately $17.67 billion. These Bitcoins mainly come from government confiscations after cracking down on illegal activities. Although China has adopted strict regulation on cryptocurrencies at the policy level, Bitcoins confiscated during judicial disposal and law enforcement still constitute an indirect source of its holdings.
Russia's Bitcoin holdings are mainly indirectly realized through its abundant mining resources. Although the Russian government has not disclosed the specific amount of holdings, its mining industry accounts for about 11% of the global Bitcoin mining share, ranking third in the world. This provides an important basis for Russia to accumulate Bitcoin reserves through mining. Due to Western sanctions, Russia is seeking to bypass the SWIFT system through Bitcoin and explore new ways of cross-border trade. In 2024, President Putin signed a bill to officially legalize Bitcoin mining and use abundant energy resources to support the Bitcoin mining industry. Russia has also proposed to pay for international trade through cryptocurrencies. This series of measures highlights the position of Bitcoin in Russia's financial autonomy strategy.
Other countries are also gradually emerging in the field of Bitcoin. The United Kingdom holds 61,000 Bitcoins, worth $5.56 billion; Ukraine holds 46,351 Bitcoins, worth $4.22 billion; and Bhutan holds 13,029 Bitcoins, worth $1.19 billion. In addition, El Salvador, the first country in the world to set Bitcoin as legal tender, currently holds 5,748.8 Bitcoins, worth about $520 million. This action marks the country's active exploration of Bitcoin as an economic tool.
The motivations behind sovereign states around the world choosing to hold Bitcoin are rich and varied: hedging economic risks, achieving financial sovereignty, bypassing economic sanctions, and promoting digital economic innovation.
1. Hedging against economic sanctions and enhancing financial sovereignty
For some countries facing international economic sanctions, the decentralized nature of Bitcoin provides them with a way to circumvent the traditional financial system. For example, countries such as Venezuela and Iran face serious obstacles in international transactions and capital flows due to financial sanctions from Western countries. Bitcoin does not rely on traditional banks and intermediaries, so it can be a tool for these countries to circumvent sanctions, maintain international trade, and obtain foreign exchange.
In addition, by holding Bitcoin, the country can reduce its dependence on the US dollar to a certain extent, thereby enhancing its financial sovereignty. Especially for some developing countries that are concerned about the hegemony of the US dollar, holding Bitcoin has become an important means of increasing financial independence. El Salvador is a typical example in this regard-the country adopted Bitcoin as legal tender in 2021 and added Bitcoin to its strategic reserves, trying to reduce its dependence on the US dollar through this strategy while attracting global cryptocurrency investors.
2. Hedge against inflation and currency depreciation
Some countries are facing the problem of high inflation and currency depreciation. Bitcoin's scarcity (upper limit of 21 million coins) and decentralized nature make it an effective hedging tool. For example, countries such as Argentina and Turkey have had high inflation rates in recent years, and residents and governments in these countries are facing the problem of rapid depreciation of their fiat currencies.
In this context, Bitcoin as "digital gold" is seen as an attractive option that can help these countries reduce losses from currency depreciation through strategic reserves. In fact, some central banks in developing countries have begun to study cryptocurrencies as part of their international reserves so that they have a means of storing value that is not affected by traditional monetary policy when facing currency depreciation.
3. Promote the development of the digital economy and attract foreign investment
Another important motivation for the strategic reserve of Bitcoin is to promote the development of the country's digital economy by embracing cryptocurrencies. Especially for countries like El Salvador, by legalizing Bitcoin and adding it to the strategic reserve, they are trying to attract international cryptocurrency companies, investors and entrepreneurs to build a digital economy ecosystem based on blockchain.
This practice can not only promote local economic development, but also bring in certain tourism income and foreign exchange income. Salvadoran President Nayib Bukele made it clear that the use of Bitcoin can help the country get rid of its past economic difficulties and usher in a new era of digital economy. In this way, the country hopes to enhance its voice in the international financial market by holding Bitcoin, while encouraging the digital transformation of the domestic economy.
The future: opportunities and challenges of strategic reserves
Trump's promise to build a strategic Bitcoin reserve for the United States after taking office seems to be seen as a prelude to Bitcoin's peak. The market is experiencing FOMO, people are generally optimistic, and most of the signals we have come into contact with show that countries and companies will continue to buy. However, will this really develop in the future?
There is actually no lack of negative views in the traditional financial industry regarding Bitcoin strategic reserves. (Wall Street Journal) Senior market columnist James Mackintosh believes that for major economies such as the United States, it is not necessary to hold Bitcoin as a strategic reserve. He pointed out that the stability of the US economy mainly depends on "government credit" rather than the support of foreign exchange reserves. The high volatility of Bitcoin makes it difficult for it to become a reliable national reserve tool.
The billionaire director of cryptocurrency investment firm Galaxy Digital is also cautious. He believes that the possibility of Trump including Bitcoin in the US strategic reserve is not high. "I still think it is very unlikely," Novogratz said in an interview with Bloomberg on Wednesday. He explained that although the Republicans currently control the Senate, the number of seats is less than 60, which is not enough to guarantee the smooth passage of this proposal.
The future of Bitcoin is undoubtedly full of uncertainty, and both supporters and opponents have good reasons to believe in their own judgment. For companies and countries, holding Bitcoin may be an attempt to explore the future of finance, but it also means accepting the challenges of high volatility and uncertainty. The fate of Bitcoin depends on market sentiment, policy environment, and technological development. Perhaps as Mackintosh said, "Bitcoin relies more on animal spirits than economic analysis." Therefore, in this game about digital assets, it will take time to prove who will win the final victory.
In any case, as investors, we need to find a balance between enthusiasm and rationality. In the vast wave of financial change, how the future will develop, we can only wait and see.
