Companies are hoarding coins! Will the BTC strategic reserve trend come? Will BTC go from speculation to mainstream?

What is the concept of 1 million BTC strategic reserve assets?

According to statistics from the World Gold Council, as of the third quarter of 2024, the total gold reserves of the Federal Reserve reached 8,133.46 tons (approximately $530 billion), ranking first in the world. The current market value of 1 million BTC is close to $100 billion, accounting for about 19% of the size of the US gold reserves, which is quite considerable.

Image source: World Gold Council

With the increasing number of institutions/companies and sovereign countries considering the establishment of "BTC strategic reserves" alongside Trump, will BTC's "Knocksville moment" come? Can it become an important component of the global reserve asset system like gold?

The next ten years may be the key time window to reveal this answer.

What does 'strategic reserve assets' mean?

At the Bitcoin2024 conference in July 2024, Trump made a clear commitment in his speech to "never sell" BTC held by the government and acquired in the future, and adhered to the concept of "strategic BTC reserves".

With Trump's election, and the recent appointments of cryptocurrency-friendly individuals to key positions such as the US Treasury Secretary, the Chairman of the SEC, and the White House Cryptocurrency Czar, the idea of the US including BTC in its strategic reserves is one step closer to reality.

Image Source: Bitcoin2024

What is a 'strategic reserve asset'?

Fundamentally, 'strategic reserve assets' are key assets held by national or regional governments to cope with economic fluctuations, financial crises, or geopolitical risks, in order to maintain national financial stability, economic security, and international competitiveness. Such assets typically possess characteristics such as high value and general acceptance, security and stability, and liquidity.

On an enterprise level, 'strategic reserve assets' help achieve financial stability, enhance risk resistance, and support long-term growth strategies. Especially in times of economic turbulence, strategic reserve assets often form the primary barrier for enterprises to resist risks.

Traditional strategic reserve assets mainly include:

Gold: widely recognized as a stable store of value due to its scarcity and inflation resistance;

Foreign exchange reserves: The main reserve currency in US dollars, which constitutes an important means of supporting international trade and payments;

Special Drawing Rights (SDR): Allocated by the International Monetary Fund (IMF) for supplementing the official reserves of member countries;

It can be seen from this that assets that can become 'strategic reserves' need to have comprehensive advantages such as stable value, global recognition, and convenient circulation. As a emerging digital asset, BTC is gradually meeting these conditions and is starting to be seen as a potential option beyond gold.

It is worth noting that in addition to Trump's 'commitment', on July 31, 2024, US Senator Cynthia Lummis submitted the 'BITCOIN Act of 2024' to Congress, explicitly requiring the 'US Treasury to purchase 1 million BTC within 5 years and hold it for at least 20 years, unless used to repay outstanding federal debt', and planning to require the Federal Reserve to 'use a certain amount of net income each year to purchase BTC'.

The plan aims to ensure that the US government holds sufficient BTC over the next twenty years to provide the country with a long-term financial hedge. The bill has been submitted to the US Senate Committee on Banking, Housing, and Urban Affairs for discussion and voting, and will be sent to Trump for enactment into law after passing both houses.

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Why BTC besides gold and forex?

From the perspective of asset allocation, having more gold reserves does not necessarily mean better in absolute terms.

The primary consideration is that gold, as a physical asset, lacks interest or income attributes, and its liquidity returns are also not significant. This is the core reason why Buffett has long held a cautious attitude towards it - "gold cannot generate interest payments, thus lacking the compounding effect".

More importantly, gold reserves need to bear high storage and maintenance costs. For the vast majority of countries, the effective management and security of gold reserves have become an undeniable financial burden. Take the Federal Reserve's iconic gold vault "Fort Knox" as an example, its security investment is astonishing:

In the strategic hinterland of Kentucky, USA, with deep underground buried structures, equipped with heavy reinforced concrete protective walls and 24/7 security systems, a military deployment of thousands of personnel is stationed year-round. This makes the gold reserve not only a security requirement, but also evolves into a sustained heavy asset financial expenditure.

Image source: PANews

Compared to Bitcoin, its storage cost is almost negligible. It does not require physical space or expensive security facilities. It only needs to rely on secure wallets, multi-signature wallet technology, and decentralized network verification systems to achieve efficient storage management.

On a national level, BTC storage expenses are mainly focused on technical and network maintenance, far lower than the physical protection costs of gold. This means that even if BTC does not generate direct income, its holding costs are significantly better than gold, leaving more room for asset net growth.

At the same time, physical gold trading often involves complex processes such as physical delivery, storage, and transportation, with the cycle possibly extending for several days or even weeks. The gold market is often constrained by the time and geographical constraints of traditional financial systems, while BTC can achieve 7x24-hour trading through exchanges, covering the global market.

In addition to gold, foreign exchange reserves (such as the euro, yen, etc.) are not only dependent on the economic conditions of the issuing country, but are also vulnerable to geopolitical risks. BTC, on the other hand, can avoid currency policy interventions and the risk of devaluation caused by excessive issuance due to its scarcity. It allows any holder, whether individual, institutional, or sovereign state, to freely store, transfer, and trade globally.

This decentralized feature ensures that Bitcoin is not affected by political and economic interventions, and its value storage function can still play a stable role even in times of global turmoil.

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Enterprises/institutions and sovereign countries are becoming the "Pi Xiu" of BTC.

With a total market value of 2 trillion US dollars, BTC has gradually become a potential reserve tool due to its characteristics of no physical storage, global circulation, high transparency, and resistance to inflation. More and more companies/institutions and even sovereign countries are starting to explore the inclusion of BTC in their strategic reserve asset systems.

The U.S. government: one of the world's largest BTC holders

Surprisingly, the US government is actually one of the largest BTC holders in the world. Over the years, a large amount of BTC has been seized from cybercriminals, money laundering organizations, and dark web markets through law enforcement actions, with the current holdings totaling about 200,000 coins, worth nearly 20.9 billion dollars.

As the 'most cryptocurrency-friendly president' in US history (in terms of public statements), it remains to be seen whether Bitcoin will be included in the Federal Reserve asset system during Trump's next 4 years in office. However, it can be foreseen that the US government's holdings of Bitcoin may bid farewell to frequent selling patterns and instead explore its long-term strategic value.

Image source: PANews

El Salvador: DCA 1 BTC daily

El Salvador, as the world's first country to establish BTC as a legal tender, had already promulgated relevant laws as early as September 7, 2021. Subsequently, it launched the electronic wallet Chivo, pre-depositing $30 equivalent BTC for each downloading user, not only integrating BTC into the national economic system, but also highlighting its steadfast 'BTCization' route.

Whenever there is a drastic fluctuation in the cryptocurrency market, Salvadoran President Nayib Bukele often releases BTC purchase announcements through social media, injecting confidence into the market. Currently, El Salvador maintains a daily purchase pace of 1 BTC and, with continued "buying the dip," the BTC holdings reached 5,959.77 coins as of December 10, with a market value of approximately 577 million US dollars.

Although the scale of this position is not significant globally, as a small economy, its firm BTC strategy is quite exemplary and provides unique experimental cases for other countries.

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All in BTC's MicroStrategy

Outside of sovereign countries, the publicly listed company MicroStrategy is undoubtedly a benchmark in the Bitcoin 'hodling' industry, with its 'buy, buy, buy' strategy being a bold and transparent move. Its holdings even surpass the reserves of any sovereign nation in the public sphere.

MicroStrategy's first public purchase of BTC can be traced back to August 11, 2020, when it spent $250 million to buy 21,454 coins at an initial cost of about $11,652 per coin. Since then, it has continued to increase its holdings, with the most recent purchase on December 9, buying 21,550 coins for about $2.1 billion at an average price of $98,783 per coin.

As of December 8, 2024, MicroStrategy has invested approximately $25.6 billion to acquire 423,650 BTC, with an average price of about $60,324 per coin. Based on the current price of $97,000, the unrealized gain from the holdings is about $15.5 billion.

"Hodl" Tesla with BTC

On December 20, 2020, following the suggestion of Microstrategy's Michael Saylor for other CEOs to follow suit, Elon Musk expressed his interest in buying BTC for the first time. In late January 2021, Musk changed his Twitter bio to #Bitcoin, and Tesla announced the purchase of $1.5 billion worth of BTC in February 2021.

Tesla reduced its BTC holdings by 10% in the first quarter of 2021. According to Musk, this was done to test liquidity, and to verify the feasibility of BTC as an alternative asset to cash on the balance sheet.

According to Arkham data, as of the time of posting, Tesla holds 11,509 BTC, with a holding market value of about 1.1 billion US dollars.

Image source: PANews

Other countries and mainstream enterprises/institutions: BTC reserves are heading towards mainstream

The strategic value of BTC is now penetrating from the national level to the corporate and institutional levels. The national reserve layout directly affects the policy environment, while enterprises are the core driving force of adoption. BTC is no longer just a hedging tool, but also a key strategic component of corporate balance sheets.

Recently, tech giants like Microsoft and Amazon have received active proposals from investors, urging the inclusion of BTC in their balance sheets.

MicroStrategy founder Michael Saylor has proposed BTC investment advice to the Microsoft board, believing that this move will significantly enhance enterprise value and create long-term shareholder returns.

At the same time, the conservative think tank National Center for Public Policy Research in the United States suggested that Amazon allocate 1% of its total assets to BTC to enhance shareholder value and hedge against the risk of currency depreciation.

Mainstream institutions and traditional enterprises including BTC in their balance sheets can bring the following advantages:

Inflation resistance: The scarcity of 21 million hard caps gives BTC strong inflation resistance properties, helping enterprises stabilize asset values in a global environment of loose currency.

Diversified investment portfolio: As an emerging asset class, BTC enriches the dimension of corporate asset allocation, reduces reliance on a single asset, and enhances financial robustness;

Enhancing corporate brand and market image: Holding BTC demonstrates the company's embrace of innovative technology and future economic models, enhances market competitiveness, and shapes a forward-looking brand image;

However, in the process of incorporating BTC into the balance sheet, enterprises need to solve two key issues: how to safely custody large assets, and how to efficiently fulfill OTC (over-the-counter trading) demands to avoid market impact. This has prompted the flourishing development of professional custody and OTC services to meet the strict requirements of enterprises for digital asset management.

It is worth noting that with the development of the market, the digital asset service ecosystem is also continuously improving. In the custody industry, many platforms have started to adopt independent wallet design and bankruptcy isolation mechanisms, and have introduced insurance protection to cope with various risks. For example, institutions such as Hong Kong licensed exchange OSL have partnered with insurance companies such as Canopius to expand the scope of protection to multiple dimensions such as network security and technical failures. At the same time, in terms of OTC trading, as a licensed compliant platform, it is providing institutional investors with a more standardized and efficient trading environment through integration with the traditional banking system.

Bitcoin in the next decade: speculative asset or global strategic reserve?

BTC has risen from a fringe asset to a global strategic reserve rookie. More and more forces, from sovereign countries to mainstream institutions/traditional enterprises, are redefining their roles. Its scarcity, decentralized nature, and high transparency have earned it the title of "digital gold".

Despite the controversy over price volatility, the adoption of BTC is advancing unstoppably. If Trump's concept of 'strategic reserve asset' is implemented, BTC's position will closely follow that of gold, and its strategic significance may surpass gold:

Although gold is physically scarce, its distribution and trading rely on complex logistics and regulatory systems. BTC relies on blockchain technology, does not require physical storage and transportation, and can achieve rapid circulation without borders, making it more suitable as a reserve asset for countries and institutions, assuming more strategic responsibilities. This advantage has also driven professional service providers like OSL to continuously improve their infrastructure construction, creating a one-stop solution from custody to trading for institutional clients.

In the next decade, the potential of BTC as a global strategic reserve asset will be fully unleashed, and its application scenarios are expected to be further expanded. From national-level 'long-term hoarding' to corporate/institutional 'buy and hold', BTC's influence continues to expand. Global leaders and top companies such as MicroStrategy, Microsoft, and Amazon have become the best endorsers of BTC, greatly enhancing global market recognition of cryptocurrencies.

"The light boat has passed through countless mountains." Whether BTC can become a strategic reserve asset for the United States or other countries in the next 4 years or not, it has already won a key victory in the journey of adoption. With more institutions deploying BTC, professional digital asset financial infrastructure construction will play an even more critical role in the future.

[Disclaimer] The market is risky, and investment should be cautious. This article does not constitute investment advice. Users should consider whether any opinions, views, or conclusions in this article are suitable for their specific circumstances. Investment is at your own risk.

This article is authorized to be reprinted from: "PANews"

Original author: Yuliya

'Enterprise hoards coins! Will the trend of BTC strategic reserves come? Will BTC go from speculation to mainstream?' This article was first published in 'Crypto City'.