Exciting, Inevitable...But Messy - SBR Reality
The announcement of Trump’s executive order establishing a strategic Bitcoin reserve is undoubtedly net positive but it has elicited mixed reactions which are worth clarifying. There will be no net purchases for now, but Bitcoin being recognized as a reserve asset by the world’s largest economy is undoubtedly a landmark moment. This move will not go unnoticed by other governments. It wouldn’t be surprising to see copycat policies emerge, reinforcing Bitcoin’s inevitable path to broader reserve asset status. The Executive Order nature of the policy is undesirable - we would prefer broad Congressional support - and it does open bitcoin up to the risk of sales by a future administration.
Note: this article was edited in mid-March 2025 after the Trump administration made their final decision on the Strategic Reserve
Background: Reserve Assets
Most governments hold strategic reserve assets—typically through their central banks. These reserves serve a few key functions: managing monetary policy, stabilizing exchange rates, and ensuring financial resilience.
For example:
The Federal Reserve buys U.S. Treasuries to lower long-term interest rates or stimulate risk-taking—something we saw on a massive scale under Quantitative Easing.
The South African Reserve Bank might sell U.S. Treasuries to counteract extreme currency volatility.
The People’s Bank of China has historically bought U.S. Treasuries as a tool to weaken the yuan, supporting its export-driven economy.
Generally, it’s the central banks—not the government’s treasury department—that hold these assets. Treasuries, in most cases, focus on managing day-to-day finances: issuing debt, managing cash flows, and covering government expenses. The U.S. is a bit of an exception because the Treasury does hold the government’s gold reserves, a legacy of the gold standard.
What Makes a Good Reserve Asset?
For something to function as a strategic reserve asset, it needs a few key characteristics:
Deep, liquid markets – The asset must be easily bought or sold in large quantities.
Global acceptance – Many different economic players need to recognize and trade it.
Low counterparty risk – Governments need to trust that they can access and use the asset when needed.
Long-term store of value – Even if the asset is volatile in the short term, it must retain purchasing power over time.
Changing Reserve Asset Dynamics: Gold & U.S. Treasuries
For thousands of years, gold has been the reserve asset of choice because it scores well on all 4 features noted above. Gold is still held by most central banks. In fact, central bank gold purchases have been strong in recent years
Since the monetary regime change in the early 1970s U.S. Treasuries have been the dominant reserve asset. But they’re far from perfect. Compared to gold, they’re inferior in two key ways:
They are reliant on the credit quality of a centralized government which runs persistent budget deficits and racks up debt at a frantic pace - this undermines their ability to store value over the long-term
They come with counterparty risk of the centralized issuer. This was less of an issue 30 or 40 years ago, when the U.S. was the undisputed global hegemon. But that’s changed.
Big turning points have emerged with interest rates turning higher and the Russia-Ukraine war.
Long-dated US bonds have not stored value in the past 5 years. Source: Trading View
Higher interest rates have resulted in sustained weakness in long-term government bonds. TLT and index of long-dated US Treasury bonds has fallen by >45% in the last 5 years
The U.S. government froze Russia’s U.S. Treasury holdings, cutting them off from reserves they assumed were untouchable. That was a wake-up call for other governments—especially China, which holds over a trillion dollars in U.S. debt.
If the U.S. government can seize or freeze reserve assets during geopolitical conflicts, then those assets carry risk. And if that risk is high enough, central banks and governments will look for alternatives.
China is one of the largest holders of US Treasuries but is no longer purchasing additional supply
Bitcoin: The Superior Reserve Asset
Bitcoin is cutting through the old reserve asset system, much like a river reshaping a canyon—unstoppable, carving out its place, and forcing the world to adjust. Like gold, bitcoin is pristine collateral—counterparty-free, yieldless, and highly resistant to debasement. It serves the same fundamental function as gold in a reserve portfolio.
But Bitcoin also improves on gold in key ways:
Easier to Store & Transfer – Bitcoin can be self-custodied on a hardware wallet and transferred globally in minutes. Gold requires vaults, security, intermediaries and transfer is
Fully Auditable & Transparent – Bitcoin transactions and ownership are verifiable on a public ledger, while gold reserves require trust in opaque audits.
Internet-Native Money – Bitcoin can be integrated into financial systems without intermediaries, unlike gold, which still requires a trust-based settlement process.
Turns Stranded Energy into Value – Bitcoin mining monetizes wasted energy, creating economic incentives that gold mining cannot match.
Fixed Scarcity – Bitcoin has a hard cap of 21 million coins, while gold supply can increase through mining and new discoveries.
Centralized Control – Bitcoin issuance is governed by code, while gold’s price and supply are influenced by central banks who hold a significant portion of liquid supply and whose incentives are not aligned with holders
These advantages make Bitcoin a fundamentally superior reserve asset. We strongly expect that over time, Bitcoin will displace gold and U.S. Treasuries as the world’s primary reserve asset. The last 15 years of Bitcoin adoption have been a slow but steady march toward this reality. But it’s a long road—monetary shifts of this scale take decades.
Bitcoin vs. Other Crypto Assets
No other cryptocurrency comes close to Bitcoin’s monetary properties and applicability as a reserve asset:
No other asset has an unchanging monetary policy. Bitcoin’s 21 million cap is fixed—no surprises, no dilution.
No other asset is as decentralized and secure. Bitcoin operates independently of any central authority, with the highest level of security in the digital world.
No other asset has built a trust layer over 15 years of uninterrupted operation.
Some sovereign wealth funds may dabble in other crypto sectors—DeFi protocols, decentralized exchanges, on-chain lending—but that’s investment, not monetary reserve strategy. If a government is buying a monetary asset, Bitcoin is the only viable choice.
Previous statements from the Trump administration suggested that the reserve might include a broader basket of crypto assets. It’s possible that these market-moving comments from Trump’s Twitter account were traded on by insiders—yet another unfortunate signal of questionable motives that I expect will continue to plague this Presidency.
However, the final outcome has established a clear distinction between Bitcoin and other crypto assets, which is important. Bitcoin remains the dominant reserve asset within crypto—it is the most decentralized, consistent, and liquid protocol with the deepest markets. Had the administration muddied the waters by including other assets, it would have been a negative. The fact that Bitcoin, and not “crypto,” is the reserve asset is a major net positive.
No Net New Purchases (For Now)
The executive order does not involve net new Bitcoin purchases. Instead, it simply transfers the U.S. government’s existing Bitcoin holdings—acquired through confiscations—into a dedicated reserve. This makes sense at this stage; directly funneling taxpayer money into Bitcoin could raise concerns about financial market stability and long-term interest rates.
Can the US (with Reserve Currency Status) Lead This Shift?
Despite Bitcoin’s clear superiority as a reserve asset, we remain skeptical that the U.S. will become aggressive net new purchasers of bitcoin in the short-term. The U.S. dollar is still the world’s reserve currency, and any move by the U.S. to accumulate Bitcoin at scale could trigger massive market reactions:
What happens to U.S. Treasuries? Would this signal the U.S. government abandoning its debt market? How would that impact global interest rates?
How does the deficit get managed? Would the U.S. be forced into radical fiscal policy shifts?
What is the geopolitical response? Would this accelerate dedollarization among other major economies?
Beyond the market reaction, there’s also the risk of political and media backlash. The media will likely portray any reserve policy as a wealth transfer from taxpayers to crypto holders. This is a misleading narrative that I would be happy to push back against. But its powerful and certainly compelling if the reserve includes idiosyncratic crypto assets predominantly held by insiders.
Adoption is Already Happening Below the Surface
While the media fixates on Trump’s executive order, the reality is that Bitcoin’s role as a reserve asset is already growing—organically and steadily:
Individuals are accumulating – The rise of self-custody and long-term holders continues, with retail and high-net-worth investors treating Bitcoin as a hedge.
Corporations are buying – Companies like MicroStrategy and Tesla have already made Bitcoin part of their treasury strategy. Many more are following
The Better Approach: State-Level Bitcoin Reserves
While the federal-level approach to a Bitcoin strategic reserve is messy—politicized, vulnerable to reversals, and prone to speculative distractions—a state-level approach might actually be the better way forward.
States have more flexibility than the federal government when it comes to financial innovation. We’ve already seen places like Texas and Wyoming take major steps in Bitcoin adoption, and it’s not a stretch to imagine state governments within the US starting to allocate reserves to Bitcoin, especially those looking for financial independence from federal policy shifts.
Matthew Sigel suggested state-level bitcoin reserves could drive $23bn worth of BTC purchases, if approved
This decentralized approach to adoption actually mirrors Bitcoin’s own nature—it grows from the ground up.
Despite the inevitable negative narratives surrounding Trump, Bitcoin adoption as a reserve asset is still accelerating with or without the US government. The smart money knows where this is headed—it’s just a matter of time.
The advent of bitcoin ETFs, clearer crypto regulation and the potential for a strategic reserve highlights that we have entered a new era of bitcoin adoption. We expect this era will result in nation state bitcoin adoption because it is a superior technology to gold and US Treasuries. It is encouraging that the Trump administration has included only bitcoin in the strategic bitcoin reserve, but we would have preferred legislation via congressional support rather than an executive order. Whether or not there are net new purchases, its monumental that the US government is calling bitcoin a reserve asset. Copy-cats could certainly follow. Despite the noise, the path to Bitcoin’s reserve status is clear, through individual, corporate and potentially state-led adoption. It’s not a matter of if—but when.
