Opinion: Trump’s idea of a ‘Strategic Bitcoin Reserve’ lacks logic

Bitcoin, the groundbreaking digital asset, was created in 2008 with the intention of challenging official currencies like the US dollar and operating independently of governmental influence. The concept was based on a decentralized system controlled by a tamper-proof computer program aimed at limiting the supply of bitcoin to 21 million coins over time.

Initially, bitcoin was envisioned as an alternative to traditional currencies, providing scarcity to prevent depreciation through excessive printing by governments. However, rather than being used for everyday transactions, bitcoin has become more of an investment vehicle, with prices exceeding $100,000 at the beginning of this year. This shift from a currency alternative to a speculative asset has also altered the perception of bitcoin enthusiasts towards government involvement.

El Salvador’s decision in 2021 to start accumulating bitcoin prompted a change in perspective among many bitcoin holders, who now advocate for official government engagement with the digital asset. This sentiment was echoed in proposals made by former President Donald Trump, Senator Robert F. Kennedy Jr., and Senator Cynthia Lummis before and after the last presidential election. Their suggestions ranged from establishing a government bitcoin reserve with existing coins to remonetizing national assets to acquire substantial amounts of bitcoin.

While some proponents argue that a strategic bitcoin reserve would bolster the government’s digital asset strategy and reduce national debt, the justifications for such actions remain vague and unconvincing. President Trump’s executive order to create a Strategic Bitcoin Reserve was presented as a step towards enhancing the US’s position in digital asset management, but the specifics of this strategy are unclear. The notion that a bitcoin reserve can significantly impact debt reduction hinges on the assumption of a substantial increase in bitcoin value and eventual liquidation of the reserve.

Despite the myriad explanations put forth to defend government bitcoin stockpiling, the lack of concrete reasoning suggests a desire to appease bitcoin supporters rather than solid economic or strategic planning. While the idea of using bitcoin reserves to address national debt or strengthen the dollar may seem plausible on the surface, the practicality and long-term effectiveness of such initiatives remain uncertain. The evolution of bitcoin from a disruptive currency concept to a speculative asset has not only reshaped its core purpose but also prompted a reassessment of its relationship with governmental entities.