On the surface, the newly announced strategic Bitcoin reserve sounds like the perfect catalyst for sending Bitcoin (Cryptography: BTC) It’s expensive for the next few years. With its support from the US government, shouldn’t the world’s most popular cryptocurrency increase its value?
Unfortunately, it’s even more complicated than that. In fact, Bitcoin prices actually fell in the days after the official announcement of the strategic Bitcoin Reserve. So what’s going on in the world here and what does that mean for Bitcoin?
The first thing you need to know is that many crypto market participants have found an official announcement of the overwhelming strategic Bitcoin Reserve at best. On the campaign trail, President Donald Trump embraced the idea of a Bitcoin-only reserve. And he appeared to support the version of the strategic Bitcoin reserve proposed by US Sen. Cynthia Ramis (R-Wyoming). It was a type of aggressive behavior that was supposed to make America “global crypto capital.”
However, this version of the strategic Bitcoin reserve is a consolidation of existing Bitcoin held by the government, many of which have been confiscated. The official White House announcement suggests that the US government could potentially buy new Bitcoin, but it should do so in a “budget-neutral” way. In short, the US government does not use taxpayer funds to buy Bitcoin. Also, there is no actual timetable if new Bitcoin purchases are likely to begin.
The Trump White House also seemed to be confusing the message about Bitcoin. The overall point of the reserve was to recognize Bitcoin along the gold or oil line as a strategic asset essential to the country’s future.
However, in parallel routes, the government is also creating US digital asset stockpiles that include different altcoin combinations. A week before the official announcement of the strategic Bitcoin reserve, President Trump appears to have shown that Ethereum, XRP, Solana and Cardano could be included. The exact cryptocurrency included is currently very flux, and it only adds to the uncertainty about what was actually created.
Even before the official announcement of the Strategic Bitcoin Reserve on March 6th, there was a pushback from the crypto industry. When news broke that other ciphers might be included, Coinbase global CEO Brian Armstrong pointed out, “Bitcoin is probably the best option…”
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Others called the move “Trump Pump” and called desperate attempts to juice up crypto prices, which have been declining since their January inauguration. And others have suggested that if Congress gets involved, some of the codes Trump nominated would actually not be included.
That being said, even if crypto market participants aren’t keen on strategic Bitcoin reserves, Bitcoin still looks like a safe purchase. Regulators seem to board the board with the notion that Bitcoin is a product rather than a security. It has a long track record surpassing the overall market, and is compared to “digital gold” for its ability to act as a long-term storage and hedge of value against inflation and economic uncertainty.
Image source: Getty Images.
None of the other cryptocurrencies of XRP, Solana, Ethereum, or Cardano can make the same claims of those. One day, all of these face potential regulatory oversight from the SEC to be securities. In fact, XRP has yet to fully resolve its four-year legal battle with the SEC. In many ways, these four cryptocurrencies can be considered as highly speculative tech stocks that can reach zero at any time.
The good news is that many other sovereign governments may launch their own strategic Bitcoin reserves, even if it takes longer than expected for the US federal government to start buying new Bitcoin. Now, Brazil now looks like a front runner, with the law in place last year. And many US states, including Texas and Florida, are pushing forward their own Bitcoin reserves.
So the whole picture here is that there will soon be pressure to buy new Bitcoin. The key is to get some sort of parliamentary action to codify strategic Bitcoin preparations into law. Trying to manage the strategic direction of the crypto industry through a large number of executive orders is simply too confusing.
After all, I’m loading it into Bitcoin, but I’m still cautious about other cryptocurrencies named as part of the US digital asset stockpile. As long as the US government continues to support Crypto, there is a pathway for Bitcoin to increase its value for the next few years.
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Dominic Basulto has a position in Bitcoin. Motley Fool has jobs at Bitcoin and Coinbase Global. Motley Fools have a disclosure policy.
Is the strategic Bitcoin reserve really that Bitcoin is rising sharply? (The answer may surprise you) Originally published by The Motley Fool
