As BTC soared past $108,000 on December 17, 2024, following President-elect Donald Trump’s proposal to establish a national Bitcoin reserve, debates about its feasibility and purpose intensified.
While some see it as a strategic move to cement American dominance in global finance, critics argue that it exposes taxpayers to unnecessary risks.
CryptoQuant CEO Ki Young Ju questioned the practicality of the proposal in a post on X on December 28, arguing the conditions under which the US could adopt Bitcoin as a strategic asset.
Donald Trump’s vision
Trump’s vision of a “Strategic National Bitcoin Stockpile” is modeled after the Strategic Petroleum Reserve, established in 1975 during the oil crisis.
He first announced this plan at the Bitcoin Conference in Nashville in July 2024. Trump suggested that the cryptocurrency seized in criminal prosecutions, which currently stands at 198,109 BTC ($18.9 billion according to BitcoinTreasures), could form the basis of the reserve.
Proponents argue that the reserve could give the US leverage over Bitcoin’s limited supply, limited to 21 million coins, of which 19.79 million are already in circulation.
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This could discourage other nations from adopting BTC as an alternative to the dollar and solidify the US dollar’s position as the world’s reserve currency.
Bitcoin rule by the US government
The United States is already the leader in Bitcoin mining, generating 37.8% of the global hash rate as of 2022 (Energy Information Administration).
Senator Cynthia Lummis of Wyoming added momentum to the reserve idea in July 2024 by proposing to the government a bill to acquire 1 million BTC over five years.
Tyler Cowen, a professor of economics at George Mason University, wrote Bloomberg that the Bitcoin reserve could strengthen the dominance of the dollar. By controlling a significant portion of the supply, the US could ensure its continued leadership in the global financial system.
Despite these advantages, many experts are skeptical. Unlike oil, Bitcoin is not necessary to run the economy or national security.
Padhraic Garvey, ING’s regional head of research, Americas, argued that the Bitcoin reserve may primarily serve to increase the US’s leverage over the asset rather than benefit the wider economy.
Economist Ramaa Vasudevan from Colorado State University warned of potential risks. She mentioned in an interview,
“The fund would provide bitcoin speculators with a guarantee that when the government crashes, it will hire this fund to bail them out.”
Establishing a reserve could expose taxpayers to bailouts in the event of a market downturn.
CryptoQuant CEO Perspective
Ki Young Ju added a layer of caution to the discussion. While he expressed personal support for Bitcoin, he noted that the US is unlikely to accept it as a strategic reserve unless its economic dominance is truly threatened.
“Market sentiment still shows confidence in US global supremacy,” he wrote on X.
Historically, the US has turned to strategic assets like gold during periods of economic uncertainty. Bitcoin, Young Ju suggests, could follow a similar trajectory if global conditions change.
However, for now, he considers Trump’s Bitcoin reserve proposal a calculated political move rather than a concrete financial strategy.
As Trump prepares to take office, questions remain about the long-term viability of his Bitcoin reserve proposal.
Whether it becomes a cornerstone of American financial policy or fades into campaign rhetoric will depend on how the administration strikes a balance between innovation and risk in the world’s largest economy.
