Bitcoin enthusiasts have long advocated the creation of a Bitcoin strategic reserve as inflation protection that can reduce national debt and reinforce the position of the United States as a global financial leader.

Its implementation could also trigger various harmful effects on the US economy, with consequences spreading around the world. Beincrypto talked to Haider Radique, OKX Exchange Marketing Director, to detail the risks of creating a Bitcoin strategic reserve.

Bitcoin strategic reserves grow in popularity

The concept of a Bitcoin strategic reserve has gained popularity over the years in both the United States and worldwide.

A strategic reserve is a stock of crucial resources acquired by the federal government that can be used to face significant supply interruptions. Many crypto enthusiasts have campaigned for governments to adopt Bitcoin as a strategic reserve.

In the United States, 15 states have already introduced or approved bills to do just that. Wyoming’s republican senator Cynthia Lummis was one of the first policies to introduce this type of federal legislation.

Lumis asks the US Treasury to get one million bitcoin over five years in its proposed Bitcoin Act. Bitcoin’s reserve would be kept intact for at least 20 years.

Countries such as Germany, Switzerland, Russia, Brazil and Poland also took action in the same direction. However, several major financial industry players fear intense economic instability and market volatility if a Bitcoin strategic reserve is created.

This fear is particularly relevant if the United States establishes such a reserve, given its role as guardian of global trade and issuing the world reserve currency.

“In fact, the idea of ​​a Bitcoin National Reserve seems good – it would serve as a Bitcoin endorse Nearby, there may be a number of disadvantages that should make the industry pause and reflect on potential long -term negative consequences, ”Radique said to the beinchrypto.

Understanding how a reserve works is vital to understanding the associated risks.

Bitcoin VS stocks Bitcoin Strategic Reserve

With Donald Trump as new US president, Bitcoin enthusiasts are preparing for a real chance to create the long -awaited reserve.

Two weeks ago, Trump signed an executive order to establish a digital national inventory. The Order summoned the creation of a working group to explore this possibility. The group has until July to submit a report on the criteria for such stock.

Some participants in the crypto community were discouraged by this measure, as the nature of the order was particularly distinct from a Bitcoin reserve. While the concept of a stock derives from assets seized mainly produced from illicit activities, a reserve implies the purchase of additional bitcoin.

The United States already has the largest bitcoin stock in the world. The federal government has at least 198,800 BTC acquired through government seizures, currently valued at approximately US $ 19 billion. The countries behind are China, the United Kingdom, El Salvador and Ukraine.

A bitcoin reserve, on the other hand, would require the purchase of more bitcoin. Lummis proposes this approach to its Bitcoin Act. According to its plan, Bitcoin would be directly linked to the US dollar to strengthen the currency. Essentially, this view implies a monetary system where Bitcoin takes on an active role.

The urgent need to introduce such a drastic change into the current United States Monetary System remains uncertain.

Debate on the role of bitcoin as reserve assets

Returning to the definition of a strategic reserve, the federal government buys these commodities in times of economic necessity. Most economists refers to the strategic oil reserve as a key example of the concept.

In 1975, President Gerald Ford created the reserve when Arab members of the organization of oil exporting countries (OPEC) imposed an oil embargo against the United States that had impacts on the US economy.

The legislation required the storage of up to one billion barrels of oil, recognizing its critical role in the economy. Without oil, economic activity would cease.

These reserves continue to serve a critical purpose. In response to Ukraine’s Russian invasion, President Biden recently used these reserves to relieve pressure on energy prices.

On the other hand, Bitcoin is not a critical purpose that justifies this type of urgent storage, nor is its use crucial to the operation of the US economy. Its role as strategic asset remains widely uncertain.

In addition, acquiring large amounts of bitcoin would probably lead to significant market volatility rather than economic stability. If the United States bought large quantities, it would rapidly reduce the offer available on the market.

If the US government decided to acquire large amounts of bitcoin, short -term liquidity in markets would be restricted, which could imply massive volatility in both directions. In fact, we must remember that the vast majority of Bitcoin’s addresses – almost 72% according to CoinmarketCap – are long -term holders of over a year. A mass acquisition of bitcoin could therefore restrict short -term liquidity, explained Radique.

These sudden movements in Bitcoin’s offering also worry investors.

Impact on trust in US $

If the United States created a Bitcoin strategic reserve, investors could interpret this as the federal government deciding to support the US dollar with digital assets instead of gold. In other words, the US would send signs of loss of confidence in the current dollar -based system.

In a recent opinion article, Nic Carter used this argument to defend against the creation of a Bitcoin reserve.

The US considering short-term abandonment of the current, relatively stable monetary system and replacing it with a gold-based monetary standard, but in an emerging and highly volatile asset, would cause total panic among its creditors. In my opinion, if we arrived near a Lummis style reserve, the markets would begin to go crazy in advance, and Trump would be forced to remove the policy, he said.

The same effect would occur if the United States chose to sell part of its bitcoin reserves.

Settlement risks

If the United States bought more bitcoin, they would also choose when it sells it.

“Despite the emergence of bipartisan support for crypto in the US political system recently, government policy can rapidly change. Therefore, as the circumstances change over time, the concentration of large amounts of Bitcoin in the balance of a country could pose a risk of liquidation, ”Radique said to the beinchrypto.

Previous cases where governments have sold parts of their bitcoin reserves have shown how such actions can significantly impact the market.

“We just need to look at last year, when the German government sold about 50,000 BTC to see what such a movement could do to the markets. This is often cited as a key disadvantage of a strategic Bitcoin reserve by critics, ”added Radique.

Germany sold all its Bitcoin reserves last July to comply with a federal law that requires the settlement of seized digital assets. Bitcoin’s big sale in a short time has made the price of bitcoin fall.

In November, a similar situation occurred in the United States when the government transferred more than $ 2 billion in Bitcoin to third party portfolios. This movement caused price declines and raised concerns among investors about possible future auctions.

Issues would also arise on the implications of federal government possession on such large amounts of Bitcoin.

For many, the idea of ​​a Bitcoin strategic reserve might seem to conflict with one of Bitcoin’s central principles: decentralization.

This philosophy, which is in the heart of Bitcoin, ensures that no unique entity can control the entire network. However, if the US government started acquiring Bitcoin in large volumes, it could generate concerns about centralization.

If US Treasury controls a significant part of Bitcoin’s supply, it could influence the market. Such control could allow the government to impact Bitcoin prices, which goes against its decentralized nature.

Risks of excessive regulation also arise as the institutional adoption of digital assets expands in the public and private sectors.

It is our collective responsibility as bitcoiners to argue that this technology is as accessible as possible, preserving its original philosophy and peer-to-peer utility, Radique said.

As the debate on the adoption of a Bitcoin Strategic Reserve continues, a weighted approach will benefit its implementation.

The case for patience

A reassuring aspect of this ongoing debate is the understanding that accelerating the process can be unnecessary. Since Bitcoin is not an essential commodity for the proper operation of the US economy, establishing a strategic reserve is not an immediate priority.

Bitcoin has existed for less than two decades. Allowing the market to have more time to mature it also reduces long -term asset volatility.

Bitcoin went from a little known cypherpunk invention to a global cultural phenomenon and an accessible institutionalized asset at a remarkably short time, Radique explained.

Adopting a waiting approach to see, Bitcoin could evolve into a more reliable and liquid asset, becoming a viable option for the US government to include in its portfolios in the future.