Bitcoiners are beginning to call into question the idea of a US Bitcoin Strategic Reserve.
The idea, floated by Wyoming Senator Cynthia Lummis, and former presidential candidate Robert F. Kennedy Jr, would create a stockpile of Bitcoin in the hands of the US government.
Lummis proposed a bill that would mean the US buy 1 million Bitcoin over the course of five years. Yesterday, a think tank dubbed the Bitcoin Policy Institute outlined an executive order for President-elect Donald Trump that would create the reserve.
Trump has also shown willingness for the idea, although any Bitcoin stockpile would be mostly made up of the 210,000 coins seized by US law enforcement agencies over the years.
A strategic reserve is a stock of a key resource – in this case Bitcoin – which can be used during times of distress.
While many crypto bulls are elated with the idea, detractors are mounting.
“It wouldn’t be prudent,” said Nic Carter, partner at Castle Island Ventures, in a Bloomberg interview on Tuesday.
A strategic reserve would shake confidence across global markets by implying the US dollar is at risk, he said. “We shouldn’t do anything that would call into question our solvency.”
Other pundits chimed in.
“It would be a signal to the world that the US does not intend to manage its fiscal house well,” said Austin Campbell, CEO of crypto payments firm WSPNPayment. “This is a terrible idea.”
George Selgin, director emeritus of the Cato Institute, calls Bitcoin an unnecessary reserve asset. He cited the country’s vast stockpiles of gold as an example why Bitcoin would make no difference for the dollar’s popularity or strength.
Potential downside
Critics also pointed to another risk: price.
Bitcoin galloped to $108,000 this week, gaining more than 150% in 2024. But drawdowns could come at any time.
“The hardest thing about being a Bitcoiner is you’re in the trade with a lot of delusional people,” Carter said. According to him, these people are already pricing in the Bitcoin strategic reserve.
And the tables could turn if Trump doesn’t make good on his campaign promises early on.
“When there’s disillusionment, it sells off,” said Carter.
Lack of support
Some advocates claim a Bitcoin Strategic Reserve is only a matter of time. Carter pushed back on that idea.
“I don’t see support in Congress,” said Carter.
For instance, Lummis put forward 31 bills during the 2023-2024 session. The proposal for a Bitcoin strategic reserve was one of only two this year that had no co-signers, according to the Library of Congress.
And most interest has so far come from the state level.
Representatives from Florida, Pennsylvania, Ohio, and Texas have put forward proposals to start building up their stockpile of Bitcoin.
Arthur Hayes, chief investment officer of Maelstrom and co-founder of BitMEX, also cast doubt on whether the idea would catch hold. He wrote in an essay that while a Bitcoin strategic reserve would allow the US to “assert financial supremacy” over other nations, short-term thinking will impede the move.
“Politicians would rather spend the newly created dollars on goodies for the population to ensure their victory in the next soon-to-be-held election,” Hayes said.
Pedro Solimano is a markets correspondent based in Buenos Aires. Got a tip? Email him at psolimano@dlnews.com.
