American Strategic Bitcoin Reserve: Pros, Cons, and Possibilities

Cryptopolitan
Updated
Mitrade
coverImg
Source: DepositPhotos

U.S. states like Ohio, Texas, and Pennsylvania are exploring Bitcoin as a reserve asset to hedge against inflation. However, experts like Nic Carter caution that its volatility could destabilize the global financial system. Despite these risks, Bitcoin’s growing adoption suggests it could play a larger role in future finance if the Government adopts it.

Bitcoin has become an investment and a potential store of value. As governments and states explore new ways to hedge against inflation and economic uncertainty, one of the best ways is the Strategic Bitcoin Reserve.

Several U.S. states are now considering Bitcoin as a reserve asset, which could alter how financial systems operate. 

Bitcoin as a Financial Asset

Unlike traditional currencies Bitcoin isn’t controlled by any government or central authority. Over the years, Bitcoin has grown with both retail and institutional investors considering it as an alternative investment.

Some see Bitcoin as a hedge against inflation, a store of value, and even a potential future currency. In recent times, even governments and large corporations are starting to take notice of Bitcoin’s potential as Reserve.

One of Bitcoin’s biggest supporters has been Michael Saylor, the CEO of MicroStrategy. Saylor has purchased about 439,000 Bitcoins which is about$46 billion worth for his company’s treasury. This sets an example for other companies and governments to consider Bitcoin a reserve asset.

Strategic Bitcoin Reserve Interest from U.S. States

Ohio has recently introduced a proposal for a “Bitcoin Reserve Fund,” which is allowing the state to purchase Bitcoin as part of its investment strategy.

Recently, El Salvador and the Central African Republic have both adopted Bitcoin as an official legal tender. Companies like Metaplanet also adopts Bitcoin reserve as an asset,

As this follows from other states of U.S. like Pennsylvania and Texas, which have also proposed laws to create Bitcoin reserves. In Ohio, House Republican Leader Derek Merrin introduced the Ohio Bitcoin Reserve Act (HB 703) in December 2024.

This bill would give the Ohio State Treasurer the authority to buy Bitcoin, protecting against the devaluation of the U.S. dollar.

Merrin stated, “The U.S. Dollar is being rapidly devalued, and our State Treasurer should have the authority and flexibility to invest in Bitcoin when determining proper asset allocation.”

As Bitcoin offers strong potential as a reserve asset due to its deflationary nature, with a fixed supply of 21 million coins making it a hedge against inflation. It ensures security and independence from political or banking instability.

Bitcoin also provides diversification for state reserves, which is reducing reliance on traditional assets.

Risks and Challenges of a Bitcoin Reserve

Nic Carter, founding partner of Castle Island Ventures recently in Bloomberg expressed concerns about the potential adoption of Bitcoin as a strategic reserve asset during an interview on Bloomberg TV.

He argued that such a move could undermine global confidence in the US dollar, which is the most important of the current financial system.

Carter stated, “I don’t think this is going to happen because it would erode confidence in the dollar, and that would be a negative outcome for everyone involved.”

He also believes that using Bitcoin as a reserve asset could cause more problems than benefits. He pointed out that Bitcoin’s price can be very unstable, which could create issues for the global financial system, which currently depends on the stable US dollar.

He said, “This is not a good idea because it could lead to volatility and instability in global markets.” As Bitcoin becomes more popular, it’s important for policymakers and financial institutions to think about these risks.

As we all know the main problems with using Bitcoin as a reserve asset is its price volatility. Bitcoin’s value can change dramatically in a short period. For example, in 2021, its price went from nearly $70,000 to around $30,000.

This kind of price swing makes Bitcoin an unstable choice for governments, as it could lead to unexpected losses if its value drops suddenly.

Another issue is the lack of clear regulations around Bitcoin as he mentioned. Recently, U.S. Federal Reserve Chairman Jerome Powell recently said that nothing to do with Bitcoin that there are no laws governing its use.

So, the market reacted all of a sudden when Powell’s comments. That led to a sudden drop in Bitcoin’s value from $107,00 to $101,300. So, Bitcoin can be a risky asset for governments, as sudden changes in the market can lead to financial instability for investors.

Possible Futures for Bitcoin Reserves

Matt, Bitwise CIO said that in an interview by December 2025, Bitcoin will likely surpass $200,000. He highlights three key things could support for the rally, ETFs, public companies like MicroStrategy, and even governments buying Bitcoin.

As Matt puts it, “there’s just too much demand, not enough supply,” which he believes that will make the price higher. Also, Matt argues that we’re still in the early stages of this journey.

As he said, “if we do get a Bitcoin strategic reserve where the government is buying Bitcoin… you’re going to be looking at three, four, $500,000 Bitcoin.”

Although he still thinks the odds are less than 50%, but it could gain traction especially with the support from key leaders.

He added, If the U.S. government starts holding Bitcoin as a reserve, its price could go up by reaching $300,000 to $500,000. While this is just an idea.

Some U.S. states like Ohio, Texas, and Pennsylvania are thinking about holding Bitcoin as part of their reserves, hoping it could protect against inflation. But its price swings and lack of clear rules are big concerns.

* The content presented above, whether from a third party or not, is considered as general advice only.  This article should not be construed as containing investment advice, investment recommendations, an offer of or solicitation for any transactions in financial instruments.

goTop
quote
Do you find this article useful?
Related Articles
placeholder
Your March Potentials Products to Look Out forIn March 2025, we will witness several major events in the financial markets with the Federal Reserve, European Central Bank, and Bank of Japan all set to announce interest rate decisions. Trump's tariff policy sweeps through the financial markets, causing significant volatility in multiple products.
Author  Mitrade
Mar 03, Mon
In March 2025, we will witness several major events in the financial markets with the Federal Reserve, European Central Bank, and Bank of Japan all set to announce interest rate decisions. Trump's tariff policy sweeps through the financial markets, causing significant volatility in multiple products.
placeholder
Bitcoin could be included in newly approved sovereign wealth fundPresident Donald Trump signed an executive order on Monday that details plans for the creation of a sovereign wealth fund for the development of the US economy, drawing the attention of crypto experts who believe that the fund could include Bitcoin.
Author  FXStreet
Feb 04, Tue
President Donald Trump signed an executive order on Monday that details plans for the creation of a sovereign wealth fund for the development of the US economy, drawing the attention of crypto experts who believe that the fund could include Bitcoin.
placeholder
Bitcoin Outlook 2025As the Bitcoin market continues to mature, its 2025 outlook appears highly favourable, driven by institutional adoption and regulatory developments.
Author  TradingKey
Jan 23, Thu
As the Bitcoin market continues to mature, its 2025 outlook appears highly favourable, driven by institutional adoption and regulatory developments.
placeholder
Will Bitcoin price reach $200K after Trump’s inauguration? BitDCA CTO weighs MicroStrategy, El-Salvador impactBitcoin price hit a new all-time high of above $109,000 amid Trump’s inauguration on Monday.
Author  FXStreet
Jan 22, Wed
Bitcoin price hit a new all-time high of above $109,000 amid Trump’s inauguration on Monday.
placeholder
Is Bitcoin’s Upward Cycle Back? Key Insights Into The Latest RecoveryBitcoin (BTC) has rebounded to trade above $99,000 following its significant dip earlier this week. While the latest US Consumer Price Index (CPI) news appears to have contributed to this quick
Author  NewsBTC
Jan 16, Thu
Bitcoin (BTC) has rebounded to trade above $99,000 following its significant dip earlier this week. While the latest US Consumer Price Index (CPI) news appears to have contributed to this quick