Quote from: fillippone on December 09, 2024, 10:49:56 PM

Lately, the idea of a Bitcoin Strategic Reserve (BSR) has surfaced in many news reports. The idea that the US could use Bitcoin as a strategic reserve has proven fundamental to propelling the price of bitcoin through the 100K barrier.

In this thread, I will explain what a Strategic Reserve is and how a Bitcoin Reserve is relevant.

1. Definition of a Strategic Reserve
2. The current proposal: B.I.T.C.O.I.N. Act
3. Implementation details: how could it be done
4. Price expectations from a BSR launch
5. Other implementations around the world
6. Opinions and thoughts from other stakeholders
7. Market expectations
8. Links and documents

1. Definition of a Strategic Reserve

A strategic reserve is a stockpile of critical resources set aside by a government, large institution, or other entity for use in exceptional circumstances — such as emergencies, severe supply disruptions, wars, or periods of extreme market volatility.
Unlike regular inventories that cycle through daily usage, strategic reserves are intentionally maintained as a buffer against uncertainty, ensuring stability and security in times of crisis.

Strategic reserves have a few characteristics that are unique and make them different from standard storage:

Long-Term Storage: strategic reserves are typically stored for extended periods and released only when severe disruptions occur.
Critical Nature of Resources: The commodities or assets involved are essential to national security, economic stability, or societal well-being.
Controlled Access: governments or top-level governing bodies usually oversee the maintenance, release, and replenishment of these reserves, guided by well-defined protocols.

For example, the United States currently has two principal strategic reserves.

Strategic Petroleum Reserve (SPR): after the oil crisis in the '70s, the US government decided to create a stockpile of oil administered by the US Department of Energy to be used both to protect the US economy against extreme market price fluctuations or as a reserve to provide power to the domestic industrial activities in case of a supply chain problem, or war. Currently, the SPR has more than 390 barrels of oils (the maximum allowed capacity of the reserve is more than 700 million barrels) held in 4 salt caves along the Gulf of Mexico for a valuation of about more than 27 billion USD, with the WTI trading at around 75$ per barrel.
Gold Reserve : The US has the largest gold reserve in the world, with about 8,133.5 metric tons, totalling almost 700 billion USD in value. Nearly 65% of those reserves are held at the United States Bullion Depository at Fort Knox.
The Federal Government owns the gold. The government has issued "Gold Certificates" to the Federal Reserve Banks for a total amount of $11 billion. These certificate serves The Federal Reserve Banks as a small portion of collateral for the Federal Reserve Notes. The Federal Reserve doesn't own gold.

The US government has many other Strategic Reserves, including natural gas, grains, food, and cheese (it used to have raisins reserves until 2015).

2. The current proposal: B.I.T.C.O.I.N. Act

Cynthia Lummis, a Republican senator from Wyoming, introduced the idea of a Bitcoin Strategic Reserve in July. She has advocated for the US government to consider Bitcoin as part of its long-term strategic reserves. In the US Senate, she named the bill B.I.T.C.O.I.N. (Boosting Innovation, Technology and Competitiveness through Optimized Investment Nationwide) Act.

Quote

July 31, 2024
WASHINGTON, D.C. – Following her announcement of a historic proposal to supercharge the US dollar and pay down the national debt by establishing a strategic Bitcoin reserve, today US Senator Cynthia Lummis (R-WY) officially introduced the Boosting Innovation, Technology and Competitiveness through Optimized Investment Nationwide (B.I.T.C.O.I.N.) Act in the US Senate.
"As families across Wyoming struggle to keep up with soaring inflation rates and our national debt reaches new and unprecedented heights, it is time for us to take bold steps to create a brighter future for generations to come by creating a strategic Bitcoin reserve," said Lummis. "Bitcoin is transforming not only our country but the world and becoming the first developed nation to use Bitcoin as a savings technology secures our position as a global leader in financial innovation. This is our Louisiana Purchase moment that will help us reach the next financial frontier."
The B.I.T.C.O.I.N. Act establishes a strategic Bitcoin reserve to serve as an additional store of value to bolster America's balance sheet and ensure the transparent management of Bitcoin holdings of the Federal Government. Specifically, the legislation would:

Establish a decentralized network of secure Bitcoin vaults operated by the United States Department of Treasury with statutory requirements ensuring the highest level of physical and cybersecurity for the nation's Bitcoin holdings.
Implement a 1-million-unit Bitcoin purchase program over a set period of time to acquire a total stake of approximately 5% of the total Bitcoin supply, mirroring the size and scope of gold reserves held by the United States.
Be paid for by diversifying existing funds within the Federal Reserve System and Treasury Department.
Affirm self-custody rights of private Bitcoin holders and emphasize that the strategic Bitcoin reserve shall not infringe upon individual financial freedoms.

Source

Her proposals and public statements outline a vision in which the US treats Bitcoin similarly to other strategic assets — such as gold — in its treasury holdings, which is getting an equal share of the world reserves of Bitcoin and gold under the US government control.

After the Trump election, the idea gained traction:

https://talkimg.com/images/2024/12/08/p1Jfg.jpeg

The Bitcoin Strategic Reserve would be enacted via a taxpayer-neutral operation, enabling the government to acquire 1 million bitcoins, hodling it for at least 20 years:

The reserve would be funded by marking the Fed's gold certificates to market value and selling them.
The government would use the surplus to buy bitcoin without using taxpayer money.
The Department of Justice would transfer the 208,000 bitcoins from the Silk Road case to the SBR.
The government will buy 200,000 bitcoins annually for four consecutive years.
The minimum hodling period would be of 20 years.

The "new" idea concerns repricing the Federal Reserve Certificates at mark-to-market valuations: the certificates were issued at a statutory gold price of $42.22/oz in 1973 and could now be valued at over $2,600/oz.

https://talkimg.com/images/2024/12/08/p1rHd.png

The gains obtained by this adjustment would enable spending without creating new debt, resulting in a neutral move regarding taxpayers' money.

3. Implementation Details: how could it be done

There are a few ways to transfer bitcoin to the Strategic Reserve:

Transfer bitcoins seized to the Treasury Department. The Department of Justice owns 208,000 bitcoins seized from the Silk Road trial. The bulk of the SBR could be instated by transferring those coins to the FED.
Open Market Purchases: the government would buy the bitcoin in the market, presumedly via a partnership with Coinbase. This would be the fastest way of obtaining bitcoins, yet the less efficient. For sure, the slippage (i.e. the price movement caused by the buying pressure) in this would be the highest.
Strategic Partnership with US Miners: this would be an ingenuous way of doing so. The government could buy the bitcoins mined in the US at an average price. This would benefit the miners with a stable price and the government limiting the market impact. The government could also collect taxes from mining firms directly in BTC and offer these subjects grants to tilt their electricity balance toward carbon neutrality via renewable energy sources or even facilitate ERCOT-style agreements with local grids (ERCOT: "Electric Reliability Council of Texas") agreement between the energy companies and miners to switch off miners during peak energy demand from the electric grids. This perfectly aligns with Donald Trump's vision of the industry.

https://talkimg.com/images/2024/12/09/p5uew.png:

Creating this kind of partnership with the private sector would benefit both the parties involved and the industry as a whole.

4. Price Expectations from a BSR launch

The launch of a Bitcoin Strategic Reserve would have an enormous impact on market price.
This would happen through different mechanisms:

Direct market impact: the buys would impact the market, directly affecting sellers. This could be somewhat mitigated through sophisticated buying strategies, as we have seen, but would dramatically change market microstructure anyway.
Indirect Market Impact: the launch of the first BSR would have very strong signalling toward other sovereign authorities, opening the race for the second BSR announcement. There will be a flywheel spinning, attracting other National Bank toward buying bitcoin, like today, there is a race to buy gold.
Model-induced Buying: the opening of BSR-induced buying is necessary to propel Bitcoin in the next phase of growth, something that is necessary for all the bullish models around (be it Stock to Flow, Power Law or S-Curve approach) to see their prediction come true. As long as those models are not "negated," the framework is bullish.

Having said that, assessing the precise impact of a BSR is quite tricky, but of course, the effect would be gargantuan.

A couple of predictions:

	https://talkimg.com/images/2024/12/10/p71DC.jpeg	https://talkimg.com/images/2024/12/10/p7ogH.jpeg
	Novogratz: 500K	Adam Back: Millions

As a ballpark, we could estimate the US buying impact based on what happened with the ETF launch. If the ETF propelled the price from 40K in January 2024 to 100K in December 2024 with 30 Billion in inflows, then 1 million bitcoins, or 100B inflows from the launch of the US SBR, could propel the market from 100K to 300K. This would account only for the first factor, leaving out the impact from factors 2 (Indirect Buying) and 3 (Model Induced Buying).

5. Other implementations are all around the world

Several countries have either established or are considering the creation of strategic Bitcoin reserves.

Amongst the established Bitcoin Reserves:

El Salvador: In September 2021, El Salvador became the first country to adopt Bitcoin as a legal tender. Since then, the government has accumulated approximately 5,940 bitcoins, valued at around $582 million as of November 2024. They perform both open market purchases (they are buying one bitcoin per day since) and mining operations.
Bhutan: The Kingdom of Bhutan has been mining Bitcoin using its hydroelectric resources since 2019. More info can be read here: Bhutan Built A Bitcoin Mine On The Site Of Its Failed 'Education City'.
As of November 2024, Bhutan holds about 12,211 bitcoins worth over $1 billion.
Contrary to other nations, Bhutan has been quite active in the market, regularly selling the bitcoin they mined.

Some other nations have proposed to instate a domestic SBR:

Brazil: In November 2024, Eros Biondini, a Brazilian Congressman, proposed a bill to create a Sovereign Strategic Reserve of Bitcoins (RESBit). The proposal involved buying bitcoin up to 5% of Brazil's international reserves. The initiative seeks to reduce the fluctuation of Brazilian real estate in order to protect the economy and develop resilience.
Poland: Presidential candidate Sławomir Mentzen has advocated for the establishment of a strategic Bitcoin reserve, along with implementing crypto-friendly regulations to attract investment and increase financial flexibility.
https://talkimg.com/images/2024/12/09/p5aUZ.png
Russia: Anton Tkachev has proposed accumulating cryptocurrencies in the state treasury, viewing digital assets as potential alternatives to the US dollar in international transactions and tackling the sanctions. Russia has been a heavy gold buyer during the last few years.
Russian Lawmaker Proposes Creating Strategic Bitcoin Reserve: Report
Czech Republic: The Czeck Central Bank is looking to convert 5% of their FX reserves into bitcoin.
https://talkimg.com/images/2025/01/29/Wl008.png
United States
- Texas: Texas House introduces bill to establish a Strategic Bitcoin Reserve
https://talkimg.com/images/2025/01/29/Wlxm3.png

These make clear that the idea of an SRB is not a pure US-centric invention but rather a sensible proposal that could reshape the future of a diverse range of countries.
Apparently, there is more to come, and it is not difficult to believe what Prince Filip of Serbia, Jan3 Chief Strategy Officer, is reporting:

https://talkimg.com/images/2024/12/09/p426J.jpeg

Other states, according to bitcointreasuries.net, have some stash of bitcoin. Still, these do not constitute Bitcoin Strategic Reserves, as they are only seized bitcoins, often sold or temporarily held by the government, waiting to be sold on the market.

6. Opinions and Thoughts from Other Stakeholders

J. Powell

	https://talkimg.com/images/2024/12/09/p4Bwg.png	https://talkimg.com/images/2024/12/09/p4gEI.png
	Bitcoin is a competitor with gold, not the US dollar	Fed's Powell says Bitcoin is just like gold, except it's digital

The declaration that Bitcoin competes with gold as the store of value asset of choice sent the bitcoin price skyrocketing on Wednesday, Dec 6th, when Bitcoin finally broke the USD 100,000 price level for the first time.

Micheal Saylor first spoke about a Strategic Bitcoin Reserve at the Cantor Conference.
https://talkimg.com/images/2024/12/09/p4p12.png
Robert F. Kennedy Jr. supported an alternative strategic reserve plan to acquire 5 million bitcoin.
Ro Khanna, a Democratic House Representative from California, was also supportive of the creation of a Bitcoin Reserve:
Quote
"We want to make sure that we have the openness to having bitcoin as part of the Federal Reserve and as a reserve asset because of its potential for appreciation and because of its potential to allow America to set the financial standards."
Bill Dudley rejected the idea of an SBR as its implementation would be highly impractical and risky.
According to Dudley, adopting an SBR would only inflate the bitcoin price without a clear benefit to the US, which would be invested in a highly volatile, illiquid asset.
Dudley also stated that the B.I.T.C.O.I.N. Act also needs a clear exit strategy.
Source
Bitcoin Policy Institute: Digital Gold Evaluating a Strategic Bitcoin Reserve for the United States
od.website-files.com/627aa615676bdd562bec97cd/672a72902d6238105d1d2068_BPI%20Policy%20Brief%20Digital%20Gold%202.pdf]https://talkimg.com/images/2024/12/09/p4LPW.png
This essay from the Bitcoin Policy Institute is the best review of the BSR concept so far. It's a recommended read.
Eric Trump: told that BSR is going to happen as Donald Trump takes office.
https://talkimg.com/images/2024/12/10/pBlJ3.png
Treasury Borrowing Advisory Committee (TBAC) says that "Primary use case for Bitcoin seems to be a store of value aka digital gold."
https://talkimg.com/images/2024/12/11/pgM3b.png

7. Market Expectation

How probable is the creation of an SBR?
There is a pool on Polymarket that places the probability of Trump going on with the proposal in the first 100 days at 29%:

https://talkimg.com/images/2024/12/09/p44Cb.png

The probability of this measure lies in the first 100 days, and the President can leverage this as a National Security Matter. This could mean he could issue an Executive Order to immediately instate the SBR as an alternative to the standard approval path through Congress.

8. Links and documents

Strategic Petroleum Reserve
Gold Holdings
United States Bullion Depository
Bitcoin Treasuries

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Lately, there's been growing buzz around the idea of a Bitcoin Strategic Reserve (BSR) a concept where the U.S. government would hold Bitcoin in the same way it holds gold or oil. The idea isn’t as far-fetched as it may sound. In fact, some argue it's already influencing Bitcoin's price momentum past the $100,000 barrier.

But before we get carried away, it’s worth taking a closer look at what this proposal actually means, and more importantly, what we’re not talking about enough.

What is a Strategic Reserve?

A strategic reserve is basically a safety stockpile — a stash of critical resources that a government or large institution keeps aside to prepare for economic shocks, supply disruptions, or emergencies. These are usually items essential to national security or economic stability, like oil, natural gas, gold, or even grain.

In the U.S., two of the most famous examples are:

The Strategic Petroleum Reserve (SPR): where over 390 million barrels of oil are stored along the Gulf Coast.

The Gold Reserve: with over 8,000 metric tons of gold held mostly in Fort Knox, worth about $700 billion.

These assets serve as national insurance policies — not things to be spent casually, but to be tapped in times of crisis.

The Bitcoin Proposal: The B.I.T.C.O.I.N. Act

In July, U.S. Senator Cynthia Lummis proposed that the country create a Bitcoin Strategic Reserve. She introduced the B.I.T.C.O.I.N. Act — short for Boosting Innovation, Technology, and Competitiveness through Optimized Investment Nationwide. The core idea? Treat Bitcoin as a strategic long-term reserve asset, just like gold.

The plan includes:

Funding the reserve using gold certificates that the Fed already holds (marked to today’s gold prices).

Avoiding taxpayer money by using those gold profits to buy Bitcoin.

Acquiring 1 million BTC over time, beginning with 200,000 BTC a year for four years.

Having the Department of Justice contribute 208,000 BTC seized from the Silk Road case.

Holding the Bitcoin for at least 20 years.

While the idea sounds innovative, there are several key concerns that aren’t getting enough attention:

1. Bitcoin Is Volatile

Gold is relatively stable. Oil prices can fluctuate, but they’re still tied to supply and demand. Bitcoin? It can lose half its value in a few months. If the U.S. government locks up a huge amount of BTC, a massive drop could make the reserve look reckless — even if the long-term thesis is solid.

2. Where Will They Store It?

1 million BTC is a huge target for hackers. The proposal doesn't explain how the government plans to securely store and manage such an enormous amount of digital assets. Cold storage? Multisig wallets? External custodians? That’s a serious gap.

3. Why 20 Years?

The proposal says the BTC should be held for 20 years but why that number? Is it linked to economic forecasts, inflation cycles, or simply a guess? The logic needs to be explained if it’s going to be credible.

4. What Happens If Bitcoin Becomes “Too Valuable”?

If Bitcoin hits $1 million, this reserve could easily be worth more than the gold reserve. What would that mean for monetary policy? Could Bitcoin undermine the dollar, or would it back it up? There’s no roadmap here.

5. The Silk Road Coins Could Be Controversial

Those 208,000 BTC from the Silk Road case were seized in a criminal investigation. Using them in a strategic reserve could invite legal challenges or ethical debates. The idea isn’t bad but it needs careful framing.

6. Public Opinion Isn’t Addressed

Let’s be honest not everyone in Congress (or the general public) loves Bitcoin. Some see it as a Ponzi scheme or tool for crime. Others worship it as financial freedom. The proposal doesn’t address how it plans to win over skeptics, which is crucial for something this bold.

7. Global Reactions Could Be Intense

If the U.S. creates a Bitcoin reserve, what will China or the EU do? Will it spark a global Bitcoin arms race? What about countries that have banned crypto altogether? We haven’t thought enough about the geopolitical impact.

A Great Start But Needs More Work

The idea of a Bitcoin Strategic Reserve isn’t crazy. In fact, it makes sense for a world that’s moving digital and where traditional financial systems feel shaky. But just like any major policy shift, it needs to be deeply thought through.

Right now, the excitement is drowning out the caution. Before we celebrate, we need to talk about custody, risk, duration, international fallout, legal concerns, and the tech side of this plan. Because once the U.S. goes down this path, there may be no turning back.

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