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By: Julian Martinez, Bitcoin Consultant
Momentum is building to establish a Strategic Bitcoin Reserve in the US. A bill called the BITCOIN Act of 2024 was introduced in the US Senate, which would commit the US Treasury to buy 1 million bitcoins over a 5-year period if passed. Similar bills have been introduced in state legislatures. It remains to be seen whether the Strategic Bitcoin Reserve will pass this legislative session; however, the mere fact that political factions within the US are advocating for bitcoin reserves will accelerate bitcoin adoption internationally.
Why are politicians pushing for strategic bitcoin reserves? They believe bitcoin will become the primary reserve asset in the digital age. If the US develops the largest bitcoin reserve, it will easily maintain its stronghold over the international finance system.
Why are some so confident that bitcoin will become the backbone of international finance? The free market is always searching for the best money. A primary function of money is to measure value. For most of history, commodities with specific qualities—such as a relatively fixed supply and divisibility—served as money. Until 1971, gold fulfilled this role.
Bitcoin was designed with ideal monetary qualities in mind. Eventually, the free market will favor bitcoin over gold. Bitcoin has a perfectly fixed supply of 21 million units and is easier to divide and transact with. Its wild price volatility reflects the free market’s process of discovering its value as money and a reserve asset.
The US’s effort to establish a Strategic Bitcoin Reserve will encourage other countries to adopt bitcoin before it is too late. If a government, central bank, or financial institution delays adopting bitcoin, they will acquire less bitcoin and at a higher price. Competitors to US hegemony, including BRICS members, will be particularly motivated to adopt bitcoin before the US gets too far ahead.
The question is not whether central banks, governments, businesses, and other financial institutions will adopt bitcoin; the question is when and at what price.
