All eyes on Trump to establish ‘strategic BTC reserve’ on Day 1

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Crypto bros are begging America to establish a ‘strategic BTC reserve’ in the hopes that other governments will follow suit and provide fuel for BTC’s sputtering ‘number go up’ rocket.

On January 8, ‘crypto Twitter’ erupted over reports that the U.S. Department of Justice (DoJ) had been granted approval to sell 69,370 BTC tokens in its possession. The tokens were seized in 2020 following an investigation into a 2012 hack of the Silk Road dark web marketplace. Silk Road closed in 2013 following the arrest of its founder, Ross Ulbricht, for money laundering, facilitating the sale of illegal narcotics, and other crimes.

In 2022, the DoJ won a final judgment on ownership of the BTC—now worth around $6.5 billion—which were seized from ‘Individual X’ aka the Silk Road hacker. Objections to the forfeiture were filed by Battle Born Investments Company, which claimed to have acquired the rights to the tokens via the bankruptcy estate of an individual believed to be the hacker.

In a last-ditch effort, Battle Born sought to compel the DoJ to identify the hacker’s name via a Freedom of Information Act request. But on December 30, 2024, Judge Richard Seeborg in the U.S. District Court for the Northern District of California rejected Battle Born’s bid, letting the original judgment stand.

While Seeborg’s ruling doesn’t offer the DoJ a green light to sell the BTC tomorrow—it’s government, after all, and lots of administrative hurdles must be cleared before any sale—crypto bros panicked at the thought of that many BTC being dumped onto an already shaky market.

After topping US$102,000 on January 6, BTC slipped to $96,000 the following day and slipped further to $94,000 on January 8. The reports of the DoJ’s freedom to sell helped push BTC below $92,000 early on January 9 before staging a minor rally.

Less excitable voices reminded the panic sellers that the market had been here before. Germany dumped around $3.5 billion worth of its own seized BTC last summer, and while BTC’s fiat value took a hit, whales such as MicroStrategy (NASDAQ: MSTR) founder Michael Saylor rode to the rescue by buying the dip (again).

Saylor appears to have been singularly responsible for propping up BTC when it began to wobble in 2024. A recent JPMorgan (NASDAQ: JPM) report estimated that MSTR was responsible for 28% of overall capital inflow into crypto markets last year. As this site’s founder recently noted, since Saylor only buys BTC, his contribution to BTC’s buoyancy was even more significant..

Saylor has extended his very expensive BTC support system into 2025, but at some point, he’s going to need some other whale to help shoulder this load. Crypto bros are hoping and praying that the biggest whale of all is ready to boost their bags.

From hell’s heart, I stab at thee

Among the more conspiratorial reactions to Seeborg’s Silk Road order was that it represented an attempt by outgoing U.S. President Joe Biden to screw with president-elect Donald Trump’s second-term agenda. Specifically, Biden was accused of directing the DoJ to sell the Silk Road tokens to torpedo Trump’s plan to establish a ‘BTC reserve.’

Last July, then-candidate Trump pledged to build a “strategic national [BTC] stockpile” based on the 200,000+ BTC already in the government’s custody as well as any additional tokens the government “acquires into the future.”

But as some cooler heads observed, Biden had little to do with it. The DoJ isn’t an investment manager and thus doesn’t have much discretion regarding seized assets that aren’t fiat currencies. It must sell them for cash and remit to the Treasury, which is what it appears to be preparing to do.

Regardless, Trump will take his oath of office on January 20, and crypto bros hope an executive order directing Congress to establish the reserve will be high on Trump’s agenda. Others have suggested that Trump could bypass Congress and issue an order to tap the billions of dollars in the Treasury’s Exchange Stabilization Fund to buy BTC.

Sen. Cynthia Lummis (R-WY) has introduced legislation that would see the government sell its gold and buy/hold up to one million BTC. That would represent nearly 5% of all the BTC that will ever be issued—even more when you consider the countless tokens frozen forever by misplaced private keys and other self-custodial gaffes.

Trump’s public statements clearly indicate that he won’t sell any BTC already in the government’s possession, but it remains unclear whether he will use public funds to purchase more.

A U.S. government buying program has become crypto bros’ obsession, as they believe other governments would swiftly follow America’s lead. This global buying spree would allegedly light a fire under BTC’s fiat price—and possibly other prominent tokens—and make HODLers instant millionaires.

But why?

The principal argument in favor of the U.S. buying loads of BTC is to hedge against the hyperinflation that will almost certainly occur should the Federal Reserve keep printing money at the rate it has over the past few decades.

America has the enormous luxury of printing the world’s reserve currency, and the country’s stability makes Treasury bills a safe haven for other governments and wealthy individuals during periods of political and economic uncertainty.

However, America’s national debt is now over $36 trillion, and the interest paid on this debt accounts for 13% of all federal spending. While America has never defaulted on its debts, this level of spending is neither advisable nor sustainable.

A crisis of confidence in America’s ability to honor its obligations could result in a bank run the likes of which the world has never faced. Consider how markets freaked out at Trump’s offhand comments during the 2016 presidential campaign about how he might try to renegotiate America’s debt obligations to pay T-bill holders a fraction of their stated value. Trump’s team quickly issued a denial, and order was restored, but it underscored the seriousness of this dilemma.

Trump himself has joked—although it’s never truly clear when his public musings are serious—that he could pay off the entire national debt “in crypto.” Last August, he told Fox Business that America could honor its debt obligations with “a little crypto check … We’ll hand them a little [BTC] and wipe out our $35 trillion.”

Advocates claim that a BTC reserve would help maintain the dollar as the world’s reserve currency, although the mechanics of this argument are a little hand-wavey. And there are prominent voices in other countries, like Germany, who have pitched their own government on adding BTC to their balance sheet as a way of reducing the need to hold dollar reserves.

Some of America’s adversaries—including Russia, China and Iran—have long sought to undermine America’s financial clout, including by proposing a new global currency issued by the ever-growing BRICS club. However, none of the BRICS members appear to trust the other members as much, so these efforts have fallen flat for now.

Russia has also been openly bragging about its use of BTC in foreign trade to minimize the impact of U.S. economic sanctions imposed after Russia’s invasion of Ukraine. So, increasing BTC’s profile appears to be a double-edged sword.

Strategic or subversive?

Fidelity Digital Assets released a report last week that claimed 2025 would be the year in which “more nation-states, central banks, sovereign wealth funds, and government treasuries will look to establish strategic positions” in BTC. Fidelity claims these government buys would be done secretly to ensure the tokens could be acquired as cheaply as possible.

Governments—led by the U.S., with China a very close second—already hold an estimated 14% of all the BTC in existence. The idea of China surpassing the U.S. on any metric is all but guaranteed to set Trump on edge, so this angle has been relentlessly promoted by those who want to see America open its checkbook.

Last week, Wang Yongli, the former VP of the Bank of China and the current co-chair of Digital China Information Services Group, wrote an op-ed claiming that Trump directing America to increase its BTC holdings “may have a serious impact on the international status of the U.S. dollar.”

Wang argued that if the U.S. buys boatloads of BTC, the token’s price will spike, making it more expensive to keep buying, adding still more dollar debt. Conversely, Trump selling BTC to pay down debt could cause the token’s price to crash, diminishing BTC’s ability to cover the debt. Wang warned China not to “blindly follow suit” if Trump made the “subversive mistake” of undermining America’s currency.

New and improved™

Nation states aren’t the only ones being pressed to adopt a ‘BTC treasury’ strategy. Investment analysts, having witnessed MSTR’s market cap inexplicably surge to a multiple of the value of its BTC holdings—despite MSTR’s core analytic software business being a money loser—have been pressing other companies to mimic Saylor’s debt-defying antics.

Saylor personally pitched Microsoft (NASDAQ: MSFT) shareholders on using some of the company’s billions to buy BTC, but less than 1% voted in favor of the motion. Amazon (NASDAQ: AMZN) has been similarly prodded to become one of the cool BTC kids, but Jeff Bezos appears (so far) to have resisted the appeals of those who need someone richer than themselves to make them rich.

Other firms, usually ones lacking a successful business model, are proving more pliable. Some prominent BTC block reward miners, for example, have raised billions in debt to buy BTC, which they view (like Saylor) as more likely to result in profit than doing the job described on their business cards.

Buying BTC in secret might be the government strategy, but corporate minnows have caught on to the easy publicity that comes from raising/spending millions on speculative investments. Companies few have heard of—KULR Technology, Matador Tech, Semler Scientific, SUNation, Thumzup and more—are gleefully hopping on the BTC bandwagon and making sure everyone knows about it.

It resembles the second half of the last decade when canny CEOs of utterly mundane companies would issue a press release about adding ‘blockchain’ to their name and almost immediately see a “significant abnormal positive return” on their share price.

The case against

When historians look back at this period, they will find a few strident voices who warned against this folly. The libertarian CATO Institute has published a number of articles arguing against the U.S. buying BTC, including trashing the Lummis gold-for-BTC switcheroo as “a plan that may only serve to pump [BTC] holders’ bags by making it look like it won’t cost a thing.”

Even BTC booster Nic Carter, who supports the government holding on to its existing stockpile, is opposed to the idea of America buying more BTC and assigning it any kind of monetary role. Doing so would “imply the U.S. is losing confidence in the current dollar-based system.”

Steve Hanke, professor of applied economics at Johns Hopkins University, recently tweeted a stinging indictment of a U.S. BTC reserve as “the stupidest idea.” Hanke called it “a drag on the economy because those savings are not invested in real capital assets that produce things.” Failing to invest in things that actually increase productivity creates “a real problem because that is what underlies improved standards of living and prosperity in an economy.”

Hanke’s view echoes a view espoused last November by CoinGeek’s Kurt Wuckert Jr., who warned that BTC reserves “will entrench an impenetrable hierarchy of lazy, entitled holders while everyone else struggles to compete in an economy devoid of productivity.”

We’ll leave the last word to David Frum, senior editor of The Atlantic, who tweeted that the reserve push was driven by BTC holders who “worry about an impending shortage of greater fools and need the US government to act as the greatest fool of last resort.”

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