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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 Reserve2. The current proposal: B.I.T.C.O.I.N. Act3. Implementation details: how could it be done4. Price expectations from a BSR launch5. Other implementations around the world6. Opinions and thoughts from other stakeholders7. Market expectations8. 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.
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.
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:
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.
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.
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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:
|  |  | | 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.
 - 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.
 - United States
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:
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
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%:
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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