Bitcoin Strategic Reserve 101

President Trump signed an executive order that marks a monumental new chapter in the adoption of digital assets. So, what comes next? A Strategic Bitcoin Reserve (SBR)? This would be huge for Prosper, Bitcoin, and the world of Crypto as a whole.

Despite his previous scepticism, Trump is treating Bitcoin in the same way that the US treats gold or oil. For Bitcoin, this is yet another acknowledgement of its position at the forefront of the crypto revolution.

So, what exactly is a Strategic Bitcoin Reserve, and why is it so important?

What is the Strategic Bitcoin Reserve?

A Strategic Bitcoin Reserve is essentially a stockpile of Bitcoin, held and owned by the US government. This would be similar to the country's existing gold and oil reserves:

• Gold reserve – The world's largest stockpile of gold serves as a hedge against economic uncertainty and potential crises
• Strategic Petroleum Reserve (SPR) – Provides petroleum after natural disasters and helps reduce inflationary pressures on energy prices

What’s Happened So Far?

On January 23rd, 2025, President Trump signed an executive order outlining the government’s intention to prioritize promoting U.S. leadership in blockchain, digital assets and other emerging financial technologies, including cryptocurrencies. In a recent press conference, Crypto Czar David Sacks also confirmed that his team would be exploring the possibility of a Strategic Bitcoin Reserve.

On February 3rd, Trump signed another executive order, ordering the creation of a sovereign wealth fund within the next year. A sovereign wealth fund is a pool of assets run by a country’s government. Treasure Secretary Scott Bessent suggested that the US government is “going to monetize the asset side of the U.S. balance sheet for the American people”. Many believe that this wealth fund will include cryptocurrencies such as Bitcoin.

How Would a Strategic Bitcoin Reserve Work?

In July 2024, Senator Cynthia Lummis introduced the BITCOIN Act of 2024. This Act proposed the acquisition of 1 million Bitcoin over a five-year period, with an annual cap of 200,000 Bitcoin every year, which represents approximately 5% of Bitcoin's total supply. Currently, the US already holds more than 207,000 Bitcoin, which could act as the basis for the SBR.

In terms of ongoing management, the Bitcoin would likely be kept in a digital "vault" (wallet) and held as an appreciating asset in the same way that a commodity such as gold would be. Thanks to blockchain technology and the transparency of the Bitcoin network, this means that the government's reserves would be constantly auditable by members of the public.

Why Would a Strategic Bitcoin Reserve Benefit the US?

A Strategic Bitcoin Reserve could be used as a hedge to protect the country's wealth against inflationary pressures and the devaluation of the US dollar, especially as Bitcoin has a fixed total supply of 21 million tokens. The Reserve would also enable the US to participate in the emerging digital economy and help to signal a shift towards regulatory certainty.

Finally, a Strategic Bitcoin Reserve could fundamentally alter the global financial system and potentially trigger a global cryptocurrency "arms race" among nations. Other countries and regions, including Germany, Poland and Hong Kong, are already considering similar reserves.

Would a Strategic Bitcoin Reserve Benefit the Bitcoin Ecosystem?

A Strategic Bitcoin Reserve could have a range of benefits for the Bitcoin ecosystem:

1/ Increased Legitimacy

A government-backed reserve further legitimizes Bitcoin as a major global asset, enhancing the credibility of the cryptocurrency, as well as cryptocurrencies in general. This, in turn, would likely help to increase Bitcoin's mainstream acceptance and adoption, while solidifying its position as the "OG" cryptocurrency.

2/ Price Appreciation

Adding Bitcoin to a Strategic Bitcoin Reserve would potentially increase demand for the asset as government adoption could encourage institutional investors to follow suit. Additionally, due to Bitcoin’s fixed supply of 21 million coins, the addition of Bitcoin to the Strategic Bitcoin Reserve reduces the available supply in the public market, increasing the scarcity of the asset. According to the laws of supply and demand, increased demand and decreased supply should see Bitcoin's price grow.

Within the crypto space, as major tokens see a price surge, it's common for related tokens – or tokens within that ecosystem – to also experience higher demand.

3/ Bitcoin Mining and Market Expansion

Growing interest in Bitcoin could lead to a growing interest in related protocols. In particular, the Bitcoin mining sector could benefit from a Strategic Bitcoin Reserve as more investors seek exposure to mining operations.

Increased mining activity would also likely lead to a higher network hashrate. This would strengthen network security by making it harder and more costly to mount a 51% attack.

Additionally, tokenizing hashrate would provide opportunities for broader participation in Bitcoin mining, aligning with the trend of an increasing hashrate and network decentralization.

Final Thoughts

In addition to providing regulatory clarity and establishing the US as a frontrunner in digital currencies, a Strategic Bitcoin Reserve could also have hugely positive implications for Bitcoin and the wider crypto space, as well as Prosper and other projects within the Bitcoin ecosystem.

Remember, Bitcoin runs on hash.