Original | Odaily Planet Daily (@OdailyChina)
Latest news, U.S. presidential candidate Trump's nominee for Secretary of Commerce, Howard Lutnick, is in talks with Tether, the world's largest stablecoin operator, to launch a project that offers dollar loans to customers backed by Bitcoin, with initial funding of $2 billion. According to insiders, Lutnick's financial services company Cantor Fitzgerald is seeking funding from Tether, and the project's final scale could reach hundreds of billions of dollars.
According to previous reports, over half of Tether's stablecoin reserves (approximately $39.2 billion) are managed by Cantor Fitzgerald, which, as a well-known bond dealer on Wall Street and one of 25 primary dealers of U.S. Treasury bonds that can trade directly with the Federal Reserve, earns tens of millions of dollars in profits each year from this arrangement.
Meanwhile, the total U.S. national debt has reached a new historical high, surpassing 36 trillion dollars. Combined with Trump's previous statements about "establishing a Bitcoin strategic reserve to address the U.S. debt crisis," market participants believe this move may indicate that the U.S. Bitcoin strategic reserve initiative is about to commence.
Odaily Planet Daily will provide an in-depth interpretation of the historical information, current analysis, challenges, and subsequent impacts related to the U.S. Bitcoin strategic reserve in this article for readers' reference.
Looking back at the beginning of the "Bitcoin Strategic Reserve": Campaign declaration or governance plan?
Looking back, the "Bitcoin strategic reserve" was first mentioned around July of this year—
In early July, German parliamentarian Joana Cotar strongly criticized the government's large-scale sale of Bitcoin, stating that the German government should reconsider this strategy and compare it with "discussions with the U.S. about using Bitcoin as a strategic reserve currency." The subsequent story is well-known; based on the recent high price of Bitcoin, the German government's "missed profit" from selling Bitcoin has expanded to 2.03 billion dollars.
In late July, Ari Paul, founder and CIO of BlockTower Capital, stated that news of "the U.S. government planning to hold Bitcoin as its strategic reserve" could be "bullish" for its price, but achieving this goal in the short term is unrealistic. He believes that "while the next president may say they 'do not intend to sell' any Bitcoin currently held by the government, that does not mean they are actually 'establishing a Bitcoin strategic reserve.'" This was also the mainstream view at the time; many believed Trump was more about expressing a "crypto-friendly attitude" to gain the support of crypto voters rather than genuinely establishing a Bitcoin strategic reserve.
However, this situation quickly reversed—Trump's clear statements at the Nashville Bitcoin conference at the end of July strongly contradicted many market participants.
In the full text of Trump's speech at the Bitcoin conference: "We will establish a Bitcoin strategic reserve and fire Gary Gensler", he stated:
If cryptocurrency is going to define the future, I want it mined, minted, and produced in the U.S., not elsewhere. If Bitcoin is going to go "To Da Moon" as we say, I want America to lead that charge… I am proud to be the first major party candidate in American history to accept Bitcoin and cryptocurrency donations.
Bitcoin represents freedom, sovereignty, and independence from government coercion and control. The Biden-Harris administration's crackdown on cryptocurrency and Bitcoin is wrong and detrimental to our country. We will keep every Bitcoin job in America. That is what we will do. Upon taking office, I will immediately establish a Presidential Advisory Committee on Bitcoin and cryptocurrency.
Bitcoin does not threaten the dollar. The current actions of the U.S. government are the real threat to the dollar. The danger to our financial future does not come from cryptocurrency but from Washington, D.C. It comes from trillions of dollars in waste, rampant inflation, and open borders, as well as providing benefits and free healthcare to millions of illegal immigrants pouring into our country. The absurd waste approved by our opponents (referring to the Democratic government) has led to the inflation disaster that Bitcoin supporters have long predicted. The value of every dollar is rapidly erased by 20%, 30%, or even 40%. You understand this, but many others do not. The life savings of millions of Americans are being rapidly destroyed. Out-of-control inflation is an invisible tax on the middle class. It is indeed. It is an invisible tax. I call it the "Biden tax."
With low energy costs, America will become the world's recognized Bitcoin mining powerhouse.
The federal government holds nearly 210,000 Bitcoins, accounting for 1% of the total supply. But for a long time, our government has violated the fundamental principle that every Bitcoin enthusiast knows: "HODL, don't sell." Right? How can I understand this? Never sell your Bitcoin.
The federal government holds nearly 210,000 Bitcoins, accounting for 1% of the total supply. If I am elected, my government policy will be that the U.S. will retain 100% of all Bitcoins currently held or acquired in the future, which will effectively serve as the core of the Bitcoin national strategic reserve. We will take measures to transform this immense wealth into a permanent national asset that benefits all Americans.
Now, after Trump's victory, the cryptocurrency advisory committee is already on the agenda, and many crypto individuals have begun to engage with the Trump administration; the previously confirmed "Bitcoin national strategic reserve" naturally stirs the hearts of countless people in the crypto industry.
In late July, Senator Cynthia Lummis proposed the “Bitcoin Strategic Reserve Act of 2024”, calling for "the purchase of 200,000 Bitcoins annually, reaching 1 million within five years," accounting for about 5% of the total Bitcoin supply. The bill plans to use existing U.S. Treasury funds to purchase Bitcoin in amounts corresponding to the U.S. Treasury's gold allocation; within less than 48 hours, the relevant U.S. senators received over 2,200 letters urging them to co-sponsor and support Cynthia Lummis's "Bitcoin Strategic Reserve Act." Previously, Cynthia Lummis also stated: "The U.S. national debt has reached 35 trillion dollars, and a Bitcoin strategic reserve could stop this out-of-control train and help future generations pay off the national debt."
In early August, Trump mentioned in an interview that Bitcoin could be used to pay off the U.S. government's 35 trillion dollars in national debt and avoid an impending debt crisis. His exact words were: "Maybe we will pay off 35 trillion dollars of (national debt) with a little cryptocurrency check, right? We will give them a little Bitcoin and wipe out our 35 trillion dollars."
It is clear that at that time, Trump had made preliminary plans for the "use" of the Bitcoin strategic reserve—to use the ever-increasing price of Bitcoin to pay off the massive debts accumulated over the years.
OKX CEO Star and MicroStrategy founder Michael Saylor also expressed their views on the U.S. Bitcoin strategic reserve plan. The former believes that "in the future, every central bank will hold a large amount of Bitcoin reserves"; the latter views the Bitcoin strategic reserve as another "Louisiana Purchase moment" for the U.S. (Note: Thomas Jefferson purchased the Louisiana Territory for 15 million dollars in 1803, nearly doubling the size of the U.S. territory, meaning that the U.S. Bitcoin strategic reserve will be an important step for the U.S. to seize Bitcoin hegemony), elevating its historical significance.
After Trump won the U.S. election in early November, Cynthia Lummis subsequently posted: "The future is bright (The future is ₿right)," stating, "We will establish a Bitcoin strategic reserve," accompanied by the iconic "Bitcoin until 100k laser eyes avatar." Given that Bitcoin's price is approaching 100,000 dollars, this undoubtedly shows great foresight.
Cynthia Lummis's laser eyes avatar
Considering the above information and Trump's approval of Musk's establishment of a DOGE government efficiency department, it appears that the U.S. Bitcoin strategic reserve plan is not just a campaign declaration used to "pull votes," but also a "governance plan" prepared to alleviate the growing pressure of national debt and curb inflation. After all, the arrow is on the string and must be released.
There is no doubt that this move has already been placed on Trump's governance agenda, and the next step to consider is—how will the Bitcoin strategic reserve be specifically implemented?
U.S. Bitcoin Strategic Reserve in Progress: Stealthy Advancement or Grand Implementation?
According to Senator Cynthia Lummis's previously proposed “Bitcoin Strategic Reserve Act of 2024”, the main content of this bill is defined as a “Bitcoin purchasing plan”:
The plan is to purchase no more than 200,000 Bitcoins annually for five years, totaling 1,000,000 Bitcoins. This will account for approximately 5% of the total Bitcoin supply; the purchasing process will be transparent and strategic to minimize market disruption; the goal is to ensure that the U.S. government can hold a significant amount of Bitcoin over the next twenty years, providing a long-term financial hedge for the nation.
The bill proposes to use existing funds from the Federal Reserve System and the Treasury to purchase Bitcoin. Specific methods include reassessing the market value of the Federal Reserve's gold certificates to reflect the market value of gold and using the difference to purchase Bitcoin. Additionally, the bill plans to reduce the surplus funds of the Federal Reserve Banks, with the saved portion allocated to the Bitcoin purchasing plan.
According to the bill, the Bitcoins purchased by the government will be held for at least 20 years. During this period, these Bitcoins cannot be sold, exchanged, or auctioned, unless used to repay national debt. After the initial holding period, no more than 10% of the reserves can be sold every two years. This rule aims to ensure the long-term stability of the Bitcoin reserves while providing some flexibility to meet future economic needs.
On November 14, according to FOX News, Pennsylvania Republican Representative Mike Cabell introduced the “Pennsylvania Bitcoin Strategic Reserve Act” (Note from Odaily Planet Daily: It is worth noting that Pennsylvania is the first state to enact legislation allowing direct purchases of Bitcoin; the previous bill regarding individual trading was the “Bitcoin Rights Act”), which will allow the state treasury to allocate 10% of its approximately $7 billion in state funds to Bitcoin to help combat inflation and diversify its investments beyond traditional assets like bonds and cash reserves. According to media reports, the bill aims to allow the state to invest 10% of certain funds, including the general fund, rainy day fund, and state investment fund, in Bitcoin. According to the state’s 2023 Treasury annual investment report, these funds manage approximately $51 billion in assets, so a 10% allocation would represent about $5.1 billion in Bitcoin investment.
On November 17, Dennis Porter, CEO of the U.S. Bitcoin advocacy organization Satoshi Action Fund (SAF), stated that the organization has “open-sourced” its Strategic Bitcoin Reserve policy model, which mentions:
Inflation has severely eroded the purchasing power of state finances and retirement funds across the U.S., affecting the economic well-being of residents; while state governments cannot control the federal money supply and macroeconomic policies, they have a responsibility to protect the financial health of their states.
As an anti-inflation asset, Bitcoin's market value has soared to over $1 trillion in the past 16 years, and it is being widely accepted as a currency and can also be seen as an inflation hedge asset. The states mentioned in the bill should use Bitcoin to guard against inflation.
State treasurers may invest public funds in Bitcoin from the following funds: 1) state general fund; 2) budget stabilization reserve fund; 3) state investment fund; 4) other state funds deemed appropriate by the legislature.
The investment in Bitcoin must not exceed 10% of the total funds in the account.
The acquired digital assets should be held in one of the following ways: A. Directly held by the state treasurer using secure custody solutions; B. Held by a qualified custodian on behalf of the state; C. Held in the form of exchange-traded products issued by registered investment companies; D. If it does not increase the financial risk of the state and complies with regulations, the treasurer may use the digital assets for loans to generate additional income.
Combining the relevant cooperation discussions between Trump's nominee for Secretary of Commerce Howard Lutnick and Tether, we can briefly summarize the execution methods of the U.S. Bitcoin strategic reserve plan as follows:
1. Direct involvement of the U.S. government: Utilizing funds from the Federal Reserve and the Treasury for “market-wide purchases,” this method is the most radical and therefore has a relatively low likelihood;
2. State-by-state approach: Just as Pennsylvania has initiated a trend of state treasury fund investments, SAF is negotiating with ten other states to implement similar legislation, making this a medium-likelihood option;
3. Existing U.S. government Bitcoin holdings + cryptocurrency industry cooperative reserves: This path can establish the foundation for the Bitcoin strategic reserve by combining the U.S. government's existing holdings of over 210,000 Bitcoins, while also setting the tone for future crypto-friendly regulations and industry development, making it a more likely path.
Nevertheless, if Trump wants to truly push the Bitcoin strategic reserve into reality, he still faces some obvious challenges.
The boulders blocking the “Bitcoin Strategic Reserve Road”: Time, Law, and Market
In simple terms, the issues that need to be resolved on the path to a Bitcoin strategic reserve mainly include the following aspects:
Time Cost: 100 days or longer?
Republican Senator Cynthia Lummis has stated that she hopes to promote her Bitcoin Reserve Bill nationwide within the first 100 days of Trump's presidency (Note from Odaily Planet Daily: Trump will officially take office on January 20, and the 100 days will approximately end in late April 2025).
Analyst PlanB shared his speculation about Bitcoin's market trends in the coming years in September, where he mentioned:
In November, Trump wins the election, ending the Democratic Biden/Harris/Warren/Gensler crackdown on cryptocurrency, and Bitcoin rises to $100,000… In April 2025, Trump and the U.S. will begin establishing a strategic Bitcoin reserve, with Bitcoin prices rising to $400,000; in May, other countries (excluding the EU) will join the competition, and Bitcoin prices will rise to $500,000; from July to December: FOMO drives Bitcoin prices to new historical highs, reaching $1 million.
It is worth mentioning that the previous “Bitcoin Rights Act” planned to submit for review by the Republican-led Senate in the coming weeks, and if passed, it would then be submitted to Wyoming Governor Josh Shapiro for signing. The national-level voting resolution and implementation will undoubtedly take longer.
Legal Obstacles: The Power Struggle Between the U.S. President and the Federal Reserve
Undoubtedly, the previous “power struggle” between Trump and Federal Reserve Chairman Powell will also affect whether the Bitcoin strategic reserve plan can proceed smoothly, after all, the Federal Reserve, as “America's purse,” holds a transcendent position.
The conflict between the two can even be traced back to Trump's previous term, when he threatened that “if Powell decides not to cut interest rates, he will be demoted.” In February of this year, Trump reiterated in an interview: “If elected again in November, I will not appoint Jerome Powell as Federal Reserve Chairman.” According to previous reports, Powell's term as Federal Reserve Chairman will also end in May 2026. After Trump's election victory, according to The Wall Street Journal, if Trump attempts to fire Federal Reserve Chairman Powell, Powell is prepared to engage in legal battles.
Market Barriers: General Skepticism Mixed with Hope
Galaxy Digital CEO Mike Novogratz previously expressed skepticism about the idea of establishing a Bitcoin strategic reserve in the U.S. proposed by President-elect Trump, stating that he does not believe the dollar needs support from assets like Bitcoin, but the U.S. should enhance its Bitcoin reserves to demonstrate its commitment to becoming a technology-oriented nation.
Jennifer J. Schulp, Director of Financial Regulation Research at the Cato Institute's Center for Monetary and Financial Alternatives, also stated: “This still puts government money at stake, and Bitcoin has not shown itself to be a particularly stable asset. The bill requires senators and congressional members to gain greater confidence in its long-term viability, which they may not be well-versed in regarding cryptocurrency.”
Anthony Pompliano, founder and CEO of Professional Capital Management, stated: “Trump's level of support for Bitcoin is enough to redefine how the U.S. treats the cryptocurrency and digital asset market. We have a president who is very supportive of Bitcoin and is committed to protecting the rights of Bitcoin users; this pioneering approach will change the economic policies of the White House. Trump holds Bitcoin and intends to establish a strategic reserve for the U.S., which is a flag.” Additionally, he predicts that the reserve will be established within 100 days.
Further interpretations of the challenges can also refer to the previous analysis by the Economic Daily here — “To truly make Bitcoin a national reserve asset of the U.S., it still needs to pass through multiple 'checkpoints'.”
Of course, the Bitcoin strategic reserve is not met with unanimous opposition; asset management giant VanEck has cast a vote in favor. Previously, VanEck's Head of Digital Asset Research, Matthew Sigel, stated: “VanEck supports the Bitcoin strategic reserve. There is no need to cite 'insiders'; we will announce it ourselves.”
Regardless of when the U.S. actions are finalized, the horn for the “national-level competition” of Bitcoin strategic reserves has already sounded.
The Future of Bitcoin Strategic Reserves: A National-Level “Crypto Arms Race”?
In early November, according to Bitcoin Magazine, German parliament member Joana Cotar stated: “If the U.S. buys Bitcoin as a strategic reserve, I believe all European countries will experience FOMO.”
Around November 12, Satoshi Action Fund founder Dennis Porter mentioned that he had received calls from five countries regarding the Bitcoin strategic reserve issue.
On November 16, asset manager and investor Anthony Pompliano stated that a global Bitcoin “arms race” among sovereign nations and governments has already begun. He also believes that “market participants believe that President-elect Trump will honor his campaign promise to establish a Bitcoin strategic reserve, which is in the best interest of the U.S. and can prevent being outpaced by other countries. Currently, there is a Bitcoin race happening globally. Whether you are a local, state, or federal government official, you should find ways to incorporate as much Bitcoin as possible into your balance sheet. This is not like gold, which we can dig more of from the ground.” He explained that the competition to adopt Bitcoin is primarily driven by currency devaluation and pointed out that U.S. residents have lost about 25% of their purchasing power over the past five years.
On November 18, Polish presidential candidate Sławomir Mentzen promised that if elected, he would adopt a Bitcoin strategic reserve.
On November 19, Binance founder CZ posted his appreciation for MicroStrategy founder Michael Saylor's speech and mentioned: “An excellent speech, worth a listen. Also, thanks for the support for Binance in the video. Countries will compete to print money to buy Bitcoin, that is, the Bitcoin Strategic Reserve. No one wants to be the last.”
On November 21, macroeconomic expert and host of the Bitcoin podcast “Mark Moss Show,” Mark Moss stated that Trump positioning himself as the “Bitcoin President” could promote the U.S. adopting a strategic Bitcoin reserve, which would trigger a “game” leading to other countries experiencing “sovereign-level FOMO (fear of missing out).” He mentioned that Senator Cynthia Lummis has proposed a bill to establish a strategic Bitcoin reserve, planning to increase holdings by 200,000 Bitcoins annually until the total reaches 1 million. Under Trump's leadership, this plan is “very likely” to become a reality, “If the U.S. does this, G7 and G20 countries will be affected… Other countries are already starting to pay attention to this matter and begin purchasing Bitcoin, which brings significant upward momentum to Bitcoin prices.”
It is evident that under the dual pressure of inflation and interest rate cuts on the dollar, Bitcoin has become a “solution” that is hoped for, much like the former “Bretton Woods system,” and this is also a race where “a step slow means every step slow.”
Conclusion: Bitcoin is not the goal but a means; monetizing debt is the way forward
As of November 25, the crypto prediction market Polymarket, which successfully predicted Trump's election as U.S. President, has attracted $845,000 in betting funds for the betting event on “Will Trump establish a national Bitcoin reserve within his first 100 days in office?”. Currently, the probability of this event is reported at 30%, down about 30% from the peak probability after Trump's election on November 7, reflecting a cooling of market expectations regarding this matter.
However, at the end of the article, I want to emphasize again that the essence of the Bitcoin strategic reserve is not merely about hoarding Bitcoin. Holding a larger quantity of Bitcoin is unlikely to provide quick relief for the U.S. national debt of $36 trillion in the short term. After all, just as “distant water cannot quench immediate thirst,” “slow money cannot cure urgent illness.” But once Bitcoin is considered at the “national fiscal level” and is then “monetized,” that is, using gradually appreciating cryptocurrencies to repay medium- to long-term debts in stages, it may become a “cure” prepared by Trump and his cabinet members for the U.S. economy.
As for the effectiveness, whether it will be a cure-all or a case of terminal illness, time will tell.
Recommended Reading
How Did America's “Crypto Patriarch” Trump Come to Be?
Bitcoin Strategic Reserve Act 2024
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