The president-elect of the United States, Donald Trump, does not usually leave anyone indifferent and his plans regarding cryptocurrencies are no exception. One of his electoral proposals consists of create a strategic national reserve of bitcoin. Although El Salvador has already done it, for the largest power in the world to carry out this project would be a milestone and could influence the rest of the world. But what is Trump’s promise?
First of all, what you need to know is that the Republican electoral program does not include this measure as such. The promise to create a bitcoin reserve was made by Donald Trump this summer at a global crypto event held in the United States. If fulfilled, it would be a strong bet by the United States for the digital asset. However, no details are known about the Republican’s specific plans and nothing has been specified in this regard. Therefore, it is striking that, despite being a significant measure, it is not included in the official program. It remains to be seen what happens during the next term.
Although the Republican leader has not told the details, it is possible to understand what it would mean to create a national reserve of bitcoin. In general, this proposal would not be far from including one more asset to the reserves that the Federal Reserve (Fed) has on its balance sheet, such as cash, gold or foreign currency. The central bank could buy bitcoins and diversify its current portfolio. In practice, the agency would acquire bitcoins and keep them in a drawer.
Central banks accumulate reserves to guarantee their liquidity and for security. Not only do they have money in their own currency, since it can register ups and downs, but they protect themselves with other currencies to be able to use them more favorably, have a certain margin with exchange rates and not deposit their risk in a single asset. Specifically, gold’s role in reserves is more focused on protecting the portfolio from inflation. Adding bitcoins would be a long-term bet with the prospect of the token continuing to rise and will provide returns.
In its long-term strategy, the Fed has largely held on to the gold it has accumulated over the past few decades, although some has also come, but it has been small. When it comes to bitcoin, something similar can happen. Although Trump has not specified, there are proposals from his party in this regard. Republican Senator Cynthia Lummis presented the Bitcoin law to the Senate. The proposal proposes buying 200,000 bitcoins per year until reaching one million and keeping them for 20 years.
Precisely, would be purchased by selling part of the current gold reserves, who have been at the Fed for decades and whose value has increased significantly. In fact, the agency has some gold bars valued at $42, so if it decides to sell them at current prices of around $2,650 per ounce, the profit is obvious.
In any case, the United States already has bitcoins. In fact, it is the country in the world that has the most. Specifically, 213,246 bitcoins, according to the crypto data firm CoinGecko. China follows with 190,000 bitcoins, the United Kingdom with 61,000 units and El Salvador with about 5,800. It should be remembered that the total supply of bitcoin is 21 million.
That is, Donald Trump’s country already has bitcoins, although they are not part of a national reserve. All these cryptocurrencies are valued at nearly $19.87 billion at current prices and come from criminal activities, so they have been seized by the authorities. If bitcoin is added to the Fed’s reserves, this amount could be included in the amount intended to be accumulated in Senator Lummis’s proposal.
The United States has a precedent in El Salvador, the first country in the world to adopt bitcoin as legal tender. In addition to this measure, Nayib Bukele is in the process of creating his own strategic reserve. As we said, you already have about 5,800 bitcoins. Bukele has always defended the strategy of buying bitcoins progressively and holding them for the long term. In fact, its has obtained a profitability of more than 100%, according to a website which collects all its operations.
Any country that makes this risky bet would do so because it trusts bitcoin blindly and assumes that prices will rise.
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