The newly elected U.S. President, Donald Trump, has set ambitious goals for the crypto community, with one of his most notable promises being the creation of a national Bitcoin reserve. Though he has yet to officially assume office, reports suggest that work on the initiative has already begun. Here’s why America is interested in building a Bitcoin fund, who is leading the charge, and what this project might mean for the broader crypto industry.
What we know about the initiative
Trump first hinted at the Bitcoin reserve plan during his speech at the Bitcoin 2024 conference in Nashville in late July 2024. Days before, Wyoming Republican Senator Cynthia Lummis, a known crypto advocate and mentor, teased details about the project. Lummis, who supported Trump’s campaign, is also the architect behind the “BITCOIN Act of 2024,” which lays the groundwork for the reserve. Key points of the act include:
- Bitcoin will be incorporated into U.S. strategic reserves, standing alongside gold.
- The reserve aims to acquire 1 million BTC. With only 21 million Bitcoin ever to be in circulation, this plan would mean the U.S. aims to hold about 5% of all existing Bitcoin. Currently, the U.S. government holds roughly 207,189 BTC, equivalent to $18 trillion, or around 0.987% of Bitcoin’s supply. These coins were mostly acquired through confiscation, rather than direct purchase.
- Funds for the Bitcoin acquisitions will come from existing reserves, with one proposal suggesting funding through the revaluation of “gold certificates.”
According to Lummis, building the reserve is estimated to take five years, after which the accumulated Bitcoin “nest egg” will be locked for 20 years. Lummis believes that by that time, Bitcoin’s value will have risen substantially, helping the U.S. tackle its $35 trillion national debt.
How US external debt has changed in relation to changes in the key rate (black curve). Source: fiscaldata.treasury
Trump also stated that cryptocurrency could become a tool for solving US debt problems.
Will the plan work
The concept of a U.S. Bitcoin reserve is rooted in Bitcoin’s deflationary nature. Here’s why this could matter:
1. Limited supply. Bitcoin’s supply is fixed, unlike fiat currency, which central banks can increase at will. Printing more money devalues the currency, but Bitcoin’s issuance is capped, creating a scarcity that could drive its value up over time.
2. Halving events. Approximately every four years, Bitcoin undergoes a “halving,” where the reward for mining new Bitcoin is cut in half. This mechanism, embedded in Bitcoin’s code, gradually reduces the supply of new Bitcoin in the market, creating upward price pressure as demand rises.
This pattern of rising value after each halving can be observed on the “rainbow chart,” which visualizes Bitcoin’s price trends over time. The chart’s color spectrum (from red-orange, signaling higher prices, to purple-blue, signaling lower prices) helps illustrate when Bitcoin was relatively expensive or cheap. Each halving event, marked by vertical lines, has historically driven Bitcoin to new all-time highs, suggesting that this trend may persist in the future.
Bitcoin “rainbow chart”. Source: blockchaincenter
3. Proof-efficient. Since its inception in 2009, Bitcoin has become one of the highest-performing assets, frequently topping investment charts. As of 2024, it has doubled in value, placing it as the eighth most capitalized asset globally, right behind gold. Meanwhile, gold, traditionally a go-to reserve asset, has only risen by 36% in the same period.
Comparison of the behavior of Bitcoin (colored curve) and gold prices (purple curve) since 2018. Source: TradingView
Progress underway
Following Trump’s election, Lummis posted on X (formerly Twitter), reiterating that the Bitcoin reserve will become a reality in the U.S. Shortly after, hints emerged that the new administration had already begun preparations. Dennis Porter, CEO of the nonprofit blockchain organization Satoshi Action Fund, revealed on X that lawmakers reached out to him to help establish the reserve, later confirming his role in the working group.
The project is expected to enter its official phase in January 2025, when Trump takes office.
What lies ahead for Bitcoin
Trump’s crypto initiatives, spearheaded by the formation of a Bitcoin reserve, could significantly enhance Bitcoin’s attractiveness as an investment. The mere announcement of Trump’s election victory has already triggered a market surge, and any official updates regarding the reserve’s formation could potentially fuel further growth in Bitcoin’s price.
The U.S.’s commitment to Bitcoin may signal the beginning of a new era for the cryptocurrency, where it is not only viewed as an asset but as a strategic resource with implications for national finance and debt management.
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This article is not investment advice or a recommendation to purchase any specific product or service. The financial transactions mentioned in the article are not a guide to action. It’s not intended to constitute a comprehensive statement of all possible risks. You should independently conduct an analysis on the basis of which it will be possible to draw conclusions and make decisions about making any operations with cryptocurrency.
