Author: James Butterfill, Head of Research, CoinShares Source: CoinShares Translation: Shan Oppa, Golden Finance
We believe that the passage of the Bitcoin Act will have a more profound long-term impact on Bitcoin than the launch of ETFs. While ETP inflows reached a record $44.2 billion in 2024, more than four times any previous year, indicating the success of ETF launches, we have yet to see a significant increase in interest from institutional investors in Bitcoin as an asset class. .
Through extensive interactions with institutional clients, CoinShares has observed thatone of the major barriers to investing in Bitcoin is its credibility among peers . Many people worry about being ridiculed for suggesting including Bitcoin in their investment portfolios, even though many of them already hold Bitcoin in their personal accounts.
The passage and implementation of the "Bitcoin Act" will win Bitcoin the endorsement of the world's largest government, thereby significantly reducing the problems faced by institutional investors. Stigma issue. If other governments follow this lead, this development could prompt significant asset inflows into Bitcoin in the coming years.
The exploration of Bitcoin as a strategic reserve
Many countries Bitcoin is being considered as a strategic reserve asset to diversify financial assets and hedge against economic uncertainty. Here are some noteworthy examples:
United States
• President-elect Donald Trump: Signs executive order to preserve existing Bitcoin reserves.
• Senator Cynthia Loomis: Introduced the "Bitcoin Act", recommending that the U.S. Treasury Department purchase up to 100 Bitcoins within five years Thousands of Bitcoins.
Currently, the United States is pursuing two different ways to establish a strategic Bitcoin reserve. The first, by far the most consequential and politically difficult, is the Bitcoin bill introduced by Senator Cynthia Lummis.
Under the bill, the United States would establish a strategic Bitcoin reserve and issue U.S. dollar-denominated bonds to purchase 1,000,000 Bitcoins, or slightly less than the total fully diluted Bitcoin 5% of the supply, purchasing an average of 200,000 Bitcoin per year over the next 5 years. The currencies will be banned from sale for the next 20 years unless they are used to pay down the U.S. Treasury debt. If passed, the Bitcoin Act would become U.S. law, meaning it would force current and future governments to act in compliance with it.
This will be a landmark event for Bitcoin and may trigger a wave of purchases of Bitcoin by countries around the world. Since the game theory of Bitcoin buying favors those willing to take the risk early, choosingnot to follow the world's largest economy in adopting a potential new monetary standard would be extremely dangerous for any country .
While the impact of this bill is huge, the likelihood of passing it may be quite slim. Getting such a proposal through Congress would be a huge political challenge, and Trump may not view it as a priority worthy of expending scarce political capital. But the likelihood is not zero, so we recommend keeping an eye on the bill’s progress.
The second and more likely path to establishing a strategic Bitcoin reserve is a recently leaked draft executive order that directs the Treasury Department to do the following Action:
Take possession of and retain all Bitcoins currently owned by any branch of the United States Government.
Include Bitcoin as a new reserve asset into the Treasury’s Exchange Stabilization Fund (ESF)
Use the $21 billion from the ESF to buy additional Bitcoin and store it in the ESF
As long as it does not violate the law, the President of the United States can issue executive orders he deems necessary without consulting Congress. Therefore, Trump can decide whether to issue this order at his own discretion. The executive order is a matter of U.S. policy, which means that a future administration can revoke or overturn the order if it wishes.
Implementing a strategic Bitcoin reserve through executive order is more likely than through legislation. Its impact will also be smaller and less forward-looking. However it is implemented, however, its global signaling effect will be clear: Bitcoin is no longer some underground asset unsuitable for serious asset allocators, but a major global asset used by the world’s largest governments to diversify their investments. Reserve assets.
EU
European lawmaker Sarah Knafo has called on the EU to reject a digital euro and establish a strategic Bitcoin reserve, warning the European Central Bank against "totalitarian temptations." Although her views are not widely shared within the EU, and the European Central Bank has been critical of Bitcoin and digital assets more broadly.
El Salvador
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President Nayib Bukele: In 2021, El Salvador became the first country to adopt Bitcoin as legal tender, aiming to increase financial inclusion and attract foreign countries invest.
Brazil
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Congressman Eros Biondini: Introduced a bill to establish the Sovereign Strategic Bitcoin Reserve (RESBit), aiming to account for 5% of Brazil’s international reserves %, used to hedge global risks.
Russia
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MP Anton Tkachev: Proposed the establishment of a national Bitcoin reserve to respond to economic sanctions and ensure financial stability.
Poland
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Presidential candidate Sławomir Mentzen: advocates establishing a strategic Bitcoin reserve and implementing crypto-friendly regulations to position Poland as a cryptocurrency haven .
Argentina
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President Javier Milei: An active advocate of Bitcoin, critical of the central banking system, and sees Bitcoin as returning control of the currency to a means by the private sector.
Japan
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Member Satoshi Yamada: Ask the government about the status of global national Bitcoin reserves and suggest that Japan consider converting part of its foreign exchange reserves into Bitcoin.
Canada
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Pierre Poilievre: Leader of the Conservative Party, who has been a prominent advocate of Bitcoin, emphasizing its potential as an inflation hedge and a decentralized alternative to the traditional monetary system.
Prime Minister Justin Trudeau: Criticized Poilievre's stance on cryptocurrencies, saying promoting Bitcoin is irresponsible behavior.
As a thought exercise, we looked at the top 20 countries with gold strategic reserve assets and hypothesized that they might Follow the example of the United States and sell 5% of reserves to diversify Bitcoin.
Based on our estimates, this is equivalent to purchasing $110 billion worth of Bitcoin, or 5.5% of the total supply.
Given that Bitcoin competes directly with the US dollar, considering Bitcoin as an alternative to the US dollar may not seem reasonable at first glance. However, whether the U.S. government likes it or not, the U.S. dollar is gradually losing its reserve currency status, raising questions about the effectiveness of post-Bretton Woods monetary policy. As we have been advising our clients, transitioning to the “Bitcoin Standard” would be extremely disruptive to the global economy. But in essence, it’s not that different from holding gold as a strategic reserve—an approach already taken by governments.
Theoretically, holding diversified strategic reserve assets can help solve the government debt problem. It would be too simplistic to dismiss Bitcoin simply because it competes with the US dollar, and we also disagree with those who claim that the US dollar is not in crisis. Indeed, as we highlighted in our 2025 outlook, central banks are diversifying their reserves, with the dollar's share falling from 71% in 2000 to 59% in 2022, according to the IMF.
If the United States includes Bitcoin as a strategic reserve asset, its credibility will be greatly improved and may have a profound impact on the price of Bitcoin and the global economy. More and more countries are considering Bitcoin as a strategic reserve, which shows that Bitcoin is gradually being regarded as one of the most stable and immutable assets in the world.
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