Bitcoin prices have jumped over 40% since Donald Trump clinched the US presidential election, partly fueled by speculation that his administration could push for a national Bitcoin reserve.
Trump supported the idea on the campaign trail, and crypto-friendly lawmakers are reportedly crafting plans to make it a reality. Bitcoin holders are thrilled at the thought of skyrocketing prices, but for the average taxpayer and the US economy, this proposal could be catastrophic.
A current bill in Congress suggests purchasing 1 million Bitcoin over five years, with a mandatory holding period of at least two decades. If enacted, such a program could cause prices to spike dramatically as investors scramble to ride the wave. But what happens when the dust settles?
Bitcoin’s missed its mark at becoming real money
Bitcoin is hands down one of humanity’s greatest inventions. It has plenty of advantages. You can store millions of dollars worth of it on a thumb drive. It allows semi-anonymous transactions, identified only by a string of characters. And you don’t need banks or middlemen to transfer it.
But calling it money is a stretch. You see, while Satoshi did mean for BTC to be an alternative, better currency, we’ve managed to turn it into an investment product. Evidently, that hasn’t turned out entirely too well.
For starters, it’s far too volatile. One day, your Bitcoin can buy a car, the next, it might only get you a coffee. Businesses aren’t required to accept it, and over 90% of the world doesn’t.Â
Unlike stocks or bonds, Bitcoin doesn’t generate income. There’s no interest, no dividends. Its supply is capped at 21 million tokens, with nearly all of them already mined.
This scarcity makes prices skyrocket whenever demand rises, but it also means the market is driven purely by speculation. Right now, Bitcoin’s market value is around $2.04 trillion, with each token priced at roughly $99,000.
A government reserve would offer no benefits to citizens
A national Bitcoin reserve would be a goldmine for current Bitcoin holders. If the US government enters the market, demand will shoot through the roof. Even a small investment ripple could send prices soaring. Imagine if global investors decided to allocate just 2% of their portfolios to Bitcoin.
With global stocks and bonds valued at $250 trillion, this would push Bitcoin’s total market value to $5 trillion—or $250,000 per token. If that allocation increased to 4%, prices would double again.
But what’s in it for taxpayers? Absolutely nothing realistically speaking. A Bitcoin reserve would be volatile and produce no income. Selling it would crash the market, making it nearly impossible to liquidate without massive losses.
To buy Bitcoin, the government would either need to borrow money which increases national debt, or print more money, fueling inflation.
The Cynthia Lummis bill even suggests tapping into the nation’s gold reserves to fund these purchases, essentially swapping one stable asset for a wildly speculative one. Naturally, there are expectations that the Federal Reserve will block the bill, and Congress would likely side with them.
On Thanksgiving weekend, Bitcoin’s price hovered around $98,000 but broke through the six-figure barrier after Trump announced Paul Atkins, a crypto lover, as the new SEC chair. Atkins replaces Gary Gensler, whose tenure was marked by aggressive lawsuits against crypto companies.
Trump’s proposals include forming a crypto advisory council with industry heavyweights. His tariff policies may also be pushing investors toward Bitcoin as a hedge against inflation.
From pizza to six-figures
Bitcoin wasn’t always the financial juggernaut it is today. It started in 2009 when Satoshi Nakamoto mined the first block on the Bitcoin blockchain. Nakamoto’s vision was simple: a decentralized currency outside the control of governments and banks.
Using blockchain technology, Bitcoin created a transparent ledger where every transaction is recorded and visible to all.
In 2010, Bitcoin made headlines for its first real-world transaction. A Florida man traded 10,000 Bitcoin—worth about $41 at the time—for two pizzas. Today, those tokens would be valued at around $1 billion. That infamous trade is celebrated annually on “Bitcoin Pizza Day.”
Bitcoin’s first major price milestone came in 2013 when it crossed $100. But as its popularity grew, so did scrutiny. Regulators raised concerns about its use in illegal activities, particularly on platforms like Silk Road, the anonymous marketplace that was shut down by authorities.
In 2013, China banned financial institutions from using Bitcoin, and the US Treasury issued guidelines warning users about potential legal risks.
Bitcoin’s first boom arrived in 2017 when its price soared to $19,000. This surge was fueled by the launch of Bitcoin futures contracts and a wave of Initial Coin Offerings (ICOs).
However, the market soon crashed, exposing the fragility of many crypto projects. Despite setbacks, Bitcoin remained resilient, reaching new heights during the pandemic as retail investors flocked to digital assets.
Regulatory risks and vulnerabilities
A national Bitcoin reserve would also amplify existing risks in the crypto market. Bitcoin’s decentralized nature makes it attractive, but it also leaves the door open for fraud, scams, and illegal activities.
Stablecoins, which are supposed to maintain a fixed value, sometimes lack proper backing, creating additional vulnerabilities. Without clear regulations, these issues are unlikely to disappear.
The government’s involvement could also set a dangerous precedent. If the US starts hoarding Bitcoin, other nations might follow suit, turning the crypto market into a geopolitical battleground. This would make Bitcoin even more volatile and speculative, undermining its credibility as a stable asset.
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