Can 1 million BTC absorb $36 trillion in U.S. debt after the dreamy connection between crypto and traditional finance?
Article author: Wenser
Source: Odaily Planet Daily
In the latest news, Howard Lutnick, the commerce secretary nominee by President-elect Trump, is in talks with Tether, the world's largest stablecoin operator, to launch a project 'providing dollar loans to clients using Bitcoin as collateral', with initial funding of $2 billion. Sources revealed that Lutnick's financial services company Cantor Fitzgerald is seeking funding from Tether, and the project's final scale could reach hundreds of billions of dollars.
According to previous reports, over half of Tether's stablecoin reserves (approximately $39.2 billion) are managed by Cantor Fitzgerald, which, as one of the 25 primary dealers in U.S. Treasuries, can trade directly with the Federal Reserve, earning tens of millions of dollars annually from this.
Meanwhile, the total amount of U.S. national debt has reached a historical high, surpassing $36 trillion. Combined with Trump's earlier statements about 'establishing a Bitcoin strategic reserve to address the U.S. debt crisis', market participants believe this move may signal the imminent launch of the U.S. Bitcoin strategic reserve.
This article provides an in-depth interpretation of the historical information, current analysis, challenges, and subsequent impacts related to the U.S. Bitcoin strategic reserve for readers' reference.
Dreaming back to the beginning of the 'Bitcoin Strategic Reserve': campaign declaration or governance plan?
Looking back, the matter of 'Bitcoin strategic reserve' was first mentioned around July of this year—
In early July, German lawmaker Joana Cotar strongly criticized the government's large-scale sale of Bitcoin, stating that the German government should reconsider this strategy and compare it with 'discussing the use of Bitcoin as a strategic reserve currency with the U.S.'. The story that follows is well known: based on the recent Bitcoin price peak, the German government's 'missed profits' from selling Bitcoin have expanded to $2.03 billion.
In late July, Ari Paul, founder and CIO of BlockTower Capital, stated that the news of 'the U.S. government planning to hold Bitcoin as its strategic reserve' might be 'bullish' for its price, but achieving this goal in the short term is unrealistic. He believes that 'while the next president may say they 'do not intend to sell' any Bitcoin currently held by the government, this does not mean they are actually 'establishing a Bitcoin strategic reserve'.' This was also the mainstream view in the market at the time, with many believing Trump was more interested in expressing a 'crypto-friendly attitude' to garner votes from crypto voters rather than truly establishing a Bitcoin strategic reserve.
However, soon this situation met with a reversal—Trump's clear statements at the Nashville Bitcoin Conference at the end of July sharply contradicted many market participants.
Quoting from the article (Full text of Trump's Bitcoin Conference speech: Establishing a Bitcoin strategic reserve, firing Gary Gensler):
If cryptocurrency is to define the future, I hope it is mined, minted, and produced in the United States rather than elsewhere. If Bitcoin is to go as we say 'To Da Moon', I hope America leads this trend... I am proud to be the first major party candidate in U.S. history to accept Bitcoin and cryptocurrency donations.
Bitcoin represents freedom, sovereignty, and independence from government coercion and control. The Biden-Harris administration's suppression of cryptocurrency and Bitcoin is wrong and detrimental to our country. We will keep every Bitcoin job in America. This is what we must do. Immediately upon taking office, I will establish a Presidential Advisory Committee on Bitcoin and cryptocurrency.
Bitcoin does not threaten the dollar. The actions of the current U.S. government are the real threat to the dollar. The danger to our financial future does not come from cryptocurrency, but from Washington, D.C. It comes from trillions of dollars of waste, rampant inflation, and open borders, as well as providing welfare and free healthcare to millions of illegal immigrants pouring into our country. The absurd waste authorized by our opponents (referring to the Democratic government) has led to the inflation disaster that Bitcoin supporters have long predicted. The value of every dollar has rapidly been wiped away by 20%, 30%, or even 40%. You understand this, but many others do not. The life savings of millions of Americans are being rapidly destroyed. Out-of-control inflation is an invisible tax on the middle class. Indeed, it is. This is an invisible tax. I call it the 'Biden tax.'
With its low energy costs, the U.S. will become a globally recognized Bitcoin mining powerhouse.
The federal government holds nearly 210,000 Bitcoins, accounting for 1% of the total supply. But for a long time, our government has violated the basic principle that every Bitcoin enthusiast knows: 'Hold, do not sell.' Right? How can I understand this? Never sell your Bitcoin.
The federal government holds nearly 210,000 Bitcoins, accounting for 1% of the total supply. If I am elected, my government policy will be that the U.S. will retain 100% of all Bitcoins currently held or acquired in the future, which will effectively serve as the core of the Bitcoin national strategic reserve. We will take measures to transform this immense wealth into a permanent national asset that benefits all Americans.
Now that Trump has won, the crypto advisory committee is on the agenda, and many crypto individuals have begun to make contact with the Trump administration; the previously confirmed 'national Bitcoin strategic reserve' naturally touches the hearts of countless people in the crypto industry.
At the end of July, Senator Cynthia Lummis proposed the (Bitcoin Strategic Reserve Act) (BITCOIN Act of 2024), calling for 'purchasing 200,000 Bitcoins annually, reaching 1 million within five years', accounting for about 5% of Bitcoin's total supply. This bill plans to use existing U.S. Treasury funds to purchase Bitcoin in amounts corresponding to the distribution of U.S. Treasury gold; within less than 48 hours, U.S. senators related to this bill received over 2,200 letters requesting them to jointly initiate and support Cynthia Lummis's 'Bitcoin Strategic Reserve Act'. Previously, Cynthia Lummis had also stated: 'The national debt of the U.S. has reached $35 trillion, and the Bitcoin strategic reserve can stop this out-of-control train and help future generations repay national debt.'
In early August, Trump mentioned in an interview that Bitcoin could be used to repay the U.S. government's national debt of up to $35 trillion and avoid an impending debt crisis. His exact words were: 'Maybe we will pay off $35 trillion of the (national debt) with a little crypto check, right? We will give them a little Bitcoin and wipe out our $35 trillion.'
It is clear that Trump had already made preliminary plans for the 'usage' of the Bitcoin strategic reserve at that time—using the continuously rising Bitcoin price to repay past accumulated massive debts.
OKX CEO Star and MicroStrategy founder Michael Saylor also shared their views on the U.S. Bitcoin strategic reserve plan. The former believes that 'in the future, every central bank will hold a large reserve of Bitcoin'; the latter views the Bitcoin strategic reserve as another 'Louisiana Purchase moment' for the U.S. (Note: Thomas Jefferson purchased the Louisiana Territory for $15 million in 1803, nearly doubling the size of the U.S. territory, meaning that the U.S. Bitcoin strategic reserve will be an important step in competing for Bitcoin hegemony), elevating its historical significance endlessly.
After Trump won the U.S. election in early November, Cynthia Lummis tweeted: 'The future is ₿right', 'We will establish a Bitcoin strategic reserve', with an iconic 'Bitcoin until 100k laser eyes avatar' as the accompanying image. Given that Bitcoin's price is approaching $100,000, this is undoubtedly quite prescient.
Cynthia Lummis's laser eyes avatar.
Considering the above information, along with Trump's approval of Musk's establishment of a DOGE government efficiency department and other measures, the U.S. Bitcoin strategic reserve plan is not only a campaign declaration used to 'pull votes' but also a 'governance plan' prepared to alleviate the growing national debt pressure and curb inflation. After all, the arrow is on the string and must be shot.
Undoubtedly, this move has already been placed on Trump's governance agenda, and the next step to consider is—how exactly will the Bitcoin strategic reserve be implemented?
The U.S. Bitcoin strategic reserve is in progress: stealth advancement or grand implementation?
According to the Bitcoin Strategic Reserve Act proposed by Senator Cynthia Lummis (BITCOIN Act of 2024), it primarily defines this bill's content as a 'Bitcoin purchasing plan':
The plan is to purchase no more than 200,000 Bitcoins each year for a continuous five years, totaling 1,000,000 Bitcoins. This would account for about 5% of Bitcoin's total supply; the purchasing process will be conducted transparently and strategically to minimize market disruption; the goal is to ensure that the U.S. government can hold a large amount of Bitcoin over the next twenty years, providing a long-term financial hedge for the country.
The bill proposes utilizing existing Federal Reserve and Treasury funds to purchase Bitcoin. Specific methods include reassessing the market value of the Federal Reserve's gold certificates and using the difference to purchase Bitcoin. Additionally, the bill plans to reduce the surplus funds of the Federal Reserve banks and use the saved portion for the Bitcoin purchasing plan.
According to the bill, the government-purchased Bitcoin will be held for at least 20 years. During this period, these Bitcoins cannot be sold, exchanged, or auctioned, unless used to repay national debt. After the initial holding period, no more than 10% of the reserves can be sold within any two-year period. This rule aims to ensure the long-term stability of the Bitcoin reserves while providing some flexibility to respond to future economic demands.
On November 14, according to FOX News, Pennsylvania Republican Representative Mike Cabell proposed the (Pennsylvania Bitcoin Strategic Reserve Act) (Note: Pennsylvania is the first state to introduce legislation allowing 'direct purchase of Bitcoin', while previous individual trading-related legislation was the (Bitcoin Rights Act)), which will allow the state's Treasury to allocate 10% of its approximately $7 billion in state funds to Bitcoin to help combat inflation and diversify its investments beyond traditional assets like bonds and cash reserves. Furthermore, media reports indicate that this bill aims to allow the state to invest 10% of certain funds, including the general fund, rainy day fund, and state investment fund, in Bitcoin. According to the state's 2023 Treasury annual investment report, these funds manage approximately $51 billion in total assets, so a 10% allocation would represent about $5.1 billion in Bitcoin investments.
On November 17, Dennis Porter, CEO of the U.S. Bitcoin advocacy organization Satoshi Action Fund (SAF), stated that the organization has 'open-sourced' its Bitcoin strategic reserve policy model (https://www.satoshiaction.io/sbr), which mentions:
Inflation has severely eroded the purchasing power of state finances and pension funds in the U.S., affecting the economic well-being of residents. Although state governments cannot control the federal monetary supply and macroeconomic policy, they have a responsibility to protect the financial health of their states.
As an anti-inflation asset, Bitcoin's market value has soared to over $1 trillion in the past 16 years, and it is being widely accepted as a currency, which can also be seen as an inflation hedge. The bill mentions that various states should use Bitcoin to guard against inflation.
State treasurers may invest public funds in Bitcoin from the following funds: 1) state general fund; 2) budget stabilization reserve fund; 3) state investment fund; 4) other state funds deemed appropriate by the legislative body.
Funds invested in Bitcoin should not exceed 10% of the total account funds.
The acquired digital assets should be held in one of the following ways: A. The state treasurer directly holds them using a secure custody solution; B. Held by a qualified custodian on behalf of the state; C. Held in the form of exchange-traded products issued by registered investment companies; D. If it does not increase the financial risk of the state and complies with regulations, the treasurer may use rules to utilize digital assets for loans to obtain additional income.
In light of the cooperation discussions between Trump's nominated commerce secretary Howard Lutnick and Tether, we can briefly summarize the implementation methods of the U.S. Bitcoin strategic reserve plan as follows:
1. The U.S. government officially intervenes: utilizing Federal Reserve and Treasury funds for 'market procurement', which is the most radical approach and therefore relatively less likely;
2. The U.S. states are conducting separate initiatives: just as Pennsylvania has initiated a trend of state treasuries investing funds, SAF is negotiating with 10 other states to implement similar legislation, thus positioning this as a medium likelihood.
3. The U.S. government already has Bitcoin holdings + cooperative reserves with the cryptocurrency industry: this path can both leverage the existing holding of over 200,000 Bitcoins by the U.S. government to lay the foundation for the Bitcoin strategic reserve and set the tone for future crypto-friendly regulation and industry development, making it a more feasible path.
Nevertheless, if Trump wants to truly promote the Bitcoin strategic reserve into reality, he still faces some intuitive challenges.
The boulders blocking the 'Bitcoin strategic reserve road': time, law, and market.
Simply put, the road ahead for the Bitcoin strategic reserve requires addressing the following issues:
Time cost: 100 days or longer?
Republican Senator Cynthia Lummis has expressed her hope to promote her Bitcoin reserve bill at the national level within the first 100 days of Trump's presidency (Note: Trump will officially take office on January 20, so the 100 days will be around the end of April 2025).
Analyst PlanB shared his predictions about Bitcoin's price movement in the next few years this September, mentioning:
In November, after Trump won the election, ending the Democratic crackdown on cryptocurrency by Biden/Harris/Warren/Gensler, Bitcoin surged to $100,000... By April 2025, Trump and the U.S. will begin establishing a strategic Bitcoin reserve, and Bitcoin's price will rise to $400,000; in May, other countries (except the EU) will join the competition, with Bitcoin's price rising to $500,000; from July to December: FOMO will push Bitcoin's price to a historical high of $1 million.
It is worth mentioning that the previous (Bitcoin rights bill) was planned to be submitted to the Republican-led Senate for review in the coming weeks, and if passed, it would be submitted to Wyoming Governor Josh Shapiro for signing. However, national-level voting resolutions and implementation will undoubtedly take longer.
Legal hurdles: The power struggle between the U.S. president and the Federal Reserve.
Undoubtedly, Trump's previous 'power struggle' with Fed Chairman Powell will also affect whether the Bitcoin strategic reserve plan can proceed smoothly, after all, as 'America's purse', the Fed holds a transcendental position.
The conflict between the two can even be traced back to Trump's previous term, when he threatened, 'If Powell decides not to cut interest rates, he will be demoted.' In February of this year, Trump again emphasized in an interview: 'If elected again in November, I will not appoint Jerome Powell as chairman of the Federal Reserve.' According to previous reports, Powell's term as Fed chairman will also end in May 2026. After Trump's victory, the Wall Street Journal reported that if Trump attempted to fire Fed Chairman Powell, Powell was prepared for a legal battle.
Market barriers: widespread skepticism mixed with hope.
Galaxy Digital CEO Mike Novogratz previously expressed skepticism about the idea of the U.S. establishing a Bitcoin strategic reserve proposed by President-elect Trump, believing that the dollar does not need support from assets like Bitcoin. However, the U.S. should enhance its Bitcoin reserves to demonstrate its commitment to becoming a technology-driven nation.
Jennifer J. Schulp, Director of Financial Regulation Research at the Cato Institute's Center for Monetary and Financial Alternatives, also stated: 'This still puts the government's money at stake, and Bitcoin has not demonstrated itself to be a particularly stable asset. The bill requires senators and congressional members to gain greater confidence in its long-term viability, which they may not understand about cryptocurrency.'
Anthony Pompliano, founder and CEO of Professional Capital Management, stated: 'Trump's support for Bitcoin is sufficient to redefine how the U.S. treats cryptocurrency and the digital asset market. We have a very Bitcoin-friendly president who promises to protect the rights of Bitcoin users, and this pioneering move will change the economic policy of the White House. Trump holds Bitcoin and intends to establish a strategic reserve for the U.S., which is a banner.' Moreover, he predicts that this reserve will be established within 100 days.
Further interpretations of the challenges can also refer to previous analyses by the Economic Daily—(To truly make Bitcoin a national reserve asset in the U.S., it still needs to pass through multiple 'gates').
Of course, the Bitcoin strategic reserve is not met with unanimous opposition; asset management giant VanEck has cast a vote in favor. Previously, VanEck's digital asset research director Matthew Sigel stated: 'VanEck supports the Bitcoin strategic reserve. There is no need to quote 'insiders'; we will announce it ourselves.'
Regardless of when the U.S. action is finalized, the horn for the 'national-level competition for Bitcoin strategic reserves' has already sounded.
The future of the Bitcoin strategic reserve: a national-level 'crypto arms race'?
In early November, Bitcoin Magazine revealed that German lawmaker Joana Cotar stated, 'If the U.S. purchases Bitcoin as a strategic reserve, I believe all European countries will experience FOMO.'
Around November 12, Dennis Porter, founder of Satoshi Action Fund, stated that he had received calls from five countries regarding Bitcoin strategic reserve issues.
On November 16, asset manager and investor Anthony Pompliano stated that a global Bitcoin 'arms race' among sovereign nations and governments has begun. He also believes that 'market participants trust that President-elect Trump will honor his campaign promise to establish a Bitcoin strategic reserve, which is in the best interest of the U.S. and can prevent being outpaced by other countries. Currently, there is a global race for Bitcoin. Whether you are a local, state, or federal government official, you should find ways to incorporate as much Bitcoin as possible into your balance sheet. This is not like gold; we can dig up more from underground.' He explained that the competition to adopt Bitcoin is mainly driven by currency devaluation and pointed out that American residents have lost about 25% of their purchasing power over the past five years.
On November 18, Polish presidential candidate Sławomir Mentzen promised to adopt a Bitcoin strategic reserve if elected.
On November 19, Binance founder CZ posted to praise MicroStrategy founder Michael Saylor's speech, mentioning: 'Great speech, worth a listen. Thanks for the support for Binance in the video. Countries will compete to print money to buy Bitcoin, that is, the Bitcoin Strategic Reserve. No one wants to be the last.'
On November 21, macroeconomic expert Mark Moss, host of the Bitcoin podcast (Mark Moss Show), stated that Trump positioning himself as the 'Bitcoin President' could promote the U.S. adopting a strategic Bitcoin reserve, which would trigger 'game theory', leading to other countries experiencing 'sovereign-level FOMO (fear of missing out)'. He mentioned that Senator Cynthia Lummis has proposed a bill hoping to establish a strategic Bitcoin reserve and plans to increase 200,000 Bitcoins annually until reaching a balance of 1 million. Under Trump's leadership, this plan is 'very likely' to become a reality, 'if the U.S. does this, G7 and G20 countries will also be affected... Other countries have already started paying attention to this matter and have begun purchasing Bitcoin, providing immense upward momentum for Bitcoin's price.'
It is evident that under the dual pressure of inflation and interest rate cuts on the dollar, Bitcoin has become a 'solution' with high hopes, similar to the former 'Bretton Woods system'. This is also a race of 'one step slow, step by step slow'.
Conclusion: Bitcoin is not the end goal but a means; monetizing debt is the key.
As of November 25, the crypto prediction market Polymarket, which successfully predicted Trump's election as U.S. president, has attracted $845,000 in bets on the speculation that 'Trump will establish a Bitcoin strategic reserve within 100 days of taking office'. Currently, the probability of this event is reported to be 30%, which is about 30% lower than the peak probability after Trump's election on November 7, reflecting a certain cooling of market expectations regarding this matter.
However, at the end of the article, the author wants to emphasize again that the essence of the Bitcoin strategic reserve is not merely to hoard Bitcoin. Accumulating more Bitcoin is unlikely to provide a quick relief to the U.S. national debt that has reached $36 trillion. After all, just as 'distant water cannot quench present thirst', 'slow money cannot cure urgent illness'. However, once Bitcoin is incorporated into the 'national financial perspective', and then 'debt monetization' is achieved, that is, using the gradually appreciating cryptocurrency to phase out medium to long-term debt, it may be the 'cure' prepared by Trump and his cabinet members for the U.S. economy.
As for the effectiveness, whether it is a cure or a dead end remains to be seen over time.
