During the election build-up, eventual victor Donald Trump made several promises specifically targeting the cryptocurrency sector. As well as promising to get rid of SEC chair Gary Gensler on day one, he also said that he would make the US the crypto capital of the planet. Another promise, which was slightly more specific, although not fully transparent, was the promise of a Bitcoin strategic reserve. According to reports, this means the US treasury will buy up 200,000 Bitcoins a year for five years, resulting in 5% of the treasury being made up of BTC.
Trump’s election victory has brought considerable optimism to the crypto market, and it has been further buoyed by the proposed installation of several Bitcoin maxis in prominent positions within government. Not only has this seen the likes of Bitcoin post significant positive moves, but it has led many first-time investors to look for the best new crypto to buy. This clamor for investment has, according to cryptocurrency author Alan Draper, seen even more presales and new coins enter the market.
The cryptocurrency market has already seen a positive year in 2024. Bitcoin and Ether exchange-traded funds launched in the first half of the year, bringing billions of dollars in institutional money to the market. Bitcoin’s price has now more than doubled since the turn of 2024, starting the year at $44,000 and currently sitting at around $95,000. It now looks like a matter of when, rather than if, Bitcoin will pass the psychological price barrier of $100,000.
A strategic reserve is a holding of certain assets that are accessible by monetary authorities. They are used to balance payments or to influence foreign exchange markets to prop up or otherwise move the exchange rate. Typical strategic reserves include commodities like oil as well as securities and traded goods like gold.
Unfortunately, Trump didn’t give much detail about his Bitcoin strategic reserve plans. One thing he did say was that the US Treasury would not sell off cryptocurrency it seized from illegal operations under his leadership. Currently, the US Treasury holds some 208,109 Bitcoins acquired in this way.
Republican Senator Cynthia Lummis has put forward her Bitcoin Act of 2024 proposal in the Senate. According to the bill, the Treasury would buy 200,000 Bitcoins every year for the next five years, giving a million Bitcoins. At its current value, that reserve would hold a value of just short of $100 billion.
Considering this would mean a substantial increase in demand for the cryptocurrency, it is highly likely that such a plan would lead to further increases in Bitcoin’s value, therefore pushing up the strategic reserve’s holding value, too.
Furthermore, if the world’s most powerful economy were to start strategically acquiring Bitcoins, this would lend greater credence to the market as a whole, ultimately leading to increased uptake in various cryptocurrencies. If, as expected, other cryptocurrencies will soon get their own ETFs, 2025 could represent yet another significant year for digital currencies.
