Love this thread, fillippone.
Very thorough, covers everything we need to know. Very exciting times if a BSR is to bear fruition. We can throw our $200,000 cycle top predictions in the bin and aim higher.
Out of Merit at the moment but will give generously when I replenish.
Great work.
Topic: Everything you wanted to know about Bitcoin Strategic Reserve. - page 4. (Read 944 times)
December 10, 2024, 04:36:55 AM
December 10, 2024, 03:45:34 AM
The one thing that doesn't make sense to me, is announcing this. The Serbian statement of making it happen behind closed doors makes more sense.
If you're going to buy a significant chunk of any market, prices will increase. The same thing happens when a company announces it's interest to buy another company, and it's now happening with Bitcoin. If the US government wants to buy 800 kBTC (for those numbers we should start using "kilo Bitcoin"), they're paying more already just because they announced it.
I'm not buying the "taxpayer-neutral" part. One way or another, if government spends money, that comes from taxpayers. They may make it look different on paper, but there's also an ever increasing debt that could have been reduced with the same money.
That makes me think the BSR is just a way to join the Bitcoin train, while protecting the dollar printing instead of bringing back sound money.
If you're going to buy a significant chunk of any market, prices will increase. The same thing happens when a company announces it's interest to buy another company, and it's now happening with Bitcoin. If the US government wants to buy 800 kBTC (for those numbers we should start using "kilo Bitcoin"), they're paying more already just because they announced it.
I'm not buying the "taxpayer-neutral" part. One way or another, if government spends money, that comes from taxpayers. They may make it look different on paper, but there's also an ever increasing debt that could have been reduced with the same money.
The "new" idea concerns repricing the Federal Reserve Certificates at mark-to-market valuations: the certificates were issued at a statutory gold price of $42.22/oz in 1973 and could now be valued at over $2,600/oz.
Gold didn't go up 6058% in value, the dollar dropped 98.38%. If they're moving towards a Bitcoin Strategic Reserve, then the value (measured in dollars) will go up forever due to eternal inflation.That makes me think the BSR is just a way to join the Bitcoin train, while protecting the dollar printing instead of bringing back sound money.
December 10, 2024, 01:44:49 AM
...
Excellent article, filliponne! I was thinking earlier today of inquiring among forum members about:
A) the prospects of serious players (major nations, or even companies like MSFT or AMZN) setting up their own BTC Strategic Reserves.
B) the advantages of being a first mover (presumably getting BTC at a lower price), the amounts of BTC to HODL, how to raise the money to buy, just HOW do they go about it, how much acquiring Reserves would affect price, etc., etc.
* * *
I have not read through your referenced links, so that's on the menu for tonight. Your thread is extremely timely.
Excellent article, filliponne! I was thinking earlier today of inquiring among forum members about:
A) the prospects of serious players (major nations, or even companies like MSFT or AMZN) setting up their own BTC Strategic Reserves.
B) the advantages of being a first mover (presumably getting BTC at a lower price), the amounts of BTC to HODL, how to raise the money to buy, just HOW do they go about it, how much acquiring Reserves would affect price, etc., etc.
* * *
I have not read through your referenced links, so that's on the menu for tonight. Your thread is extremely timely.
Price impact of the BSR is something that I have left out of the analysis so far, as the estimate are highly hypothetical. But maybe is worth adding a paragraph on it, and the snowball effect from the first mover.
In addition to that, I would like to highlight the fact that in this thread I will analyse Sovereign Stetes running Bitcoin Reserve, as I covered private (MicroStrategy) reserves elsewhere.
December 09, 2024, 11:27:57 PM
...
Excellent article, filliponne! I was thinking earlier today of inquiring among forum members about:
A) the prospects of serious players (major nations, or even companies like MSFT or AMZN) setting up their own BTC Strategic Reserves.
B) the advantages of being a first mover (presumably getting BTC at a lower price), the amounts of BTC to HODL, how to raise the money to buy, just HOW do they go about it, how much acquiring Reserves would affect price, etc., etc.
* * *
I have not read through your referenced links, so that's on the menu for tonight. Your thread is extremely timely.
Excellent article, filliponne! I was thinking earlier today of inquiring among forum members about:
A) the prospects of serious players (major nations, or even companies like MSFT or AMZN) setting up their own BTC Strategic Reserves.
B) the advantages of being a first mover (presumably getting BTC at a lower price), the amounts of BTC to HODL, how to raise the money to buy, just HOW do they go about it, how much acquiring Reserves would affect price, etc., etc.
* * *
I have not read through your referenced links, so that's on the menu for tonight. Your thread is extremely timely.
December 09, 2024, 05:49:56 PM
Lately, the Idea of a Bitcoin Strategic Reserve (SBR) has surfaced in many news reports. The idea that the US could use Bitcoin as a strategic reserve has proven fundamental to propelling the price of Bitcoin through the 100K barrier.
In this thread, I will explain what a Strategic Reserve is and How a Bitcoin Reserve is relevant.
1. Definition of a Strategic Reserve
2. The current proposal: B.I.T.C.O.I.N. Act
3. Implementation Details: how could it be done
4. Price Expectations from a BSR launch
5. Other Implementations around the world
6. Opinions and Thoughts from other stakeholders
7. Market Expectation
8. Links and documents
1. Definition of a Strategic Reserve
A strategic reserve is a stockpile of critical resources set aside by a government, large institution, or other entity for use in exceptional circumstances—such as emergencies, severe supply disruptions, wars, or periods of extreme market volatility.
Unlike regular inventories that cycle through daily usage, strategic reserves are intentionally maintained as a buffer against uncertainty, ensuring stability and security in times of crisis.
Strategic Reserves have a few characteristics that are unique and make them different from standard storage:
For example, the United States currently has two principal Strategic reserves.
The US government has many other Strategic Reserves, including natural gas, grains, food, and cheese (it used to have raisins Reserves until 2015).
2. The current proposal: B.I.T.C.O.I.N. Act
Cynthia Lummis, a Republican senator from Wyoming, introduced the idea of a Bitcoin Strategic Reserve in July. She has advocated for the US government to consider Bitcoin as part of its long-term strategic reserves. In the US Senate, she named the bill BITCOIN (Boosting Innovation, Technology and Competitiveness through Optimized Investment Nationwide) Act.
Her proposals and public statements outline a vision in which the US treats Bitcoin similarly to other strategic assets—such as Gold—in its treasury holdings, which is getting an equal share of the world reserves under the US government control.
After the Trump Election, the idea gained traction:
The Bitcoin Strategic Reserve Would be enacted via a taxpayer-neutral operation, enabling the Government to acquire 1 Million Bitcoins, hodling it for at least 20 years:
The "new" idea concerns repricing the Federal Reserve Certificates at mark-to-market valuations: the certificates were issued at a statutory gold price of $42.22/oz in 1973 and could now be valued at over $2,600/oz.
The gains obtained by this adjustment would enable spending without creating new debt, resulting in a neutral move regarding taxpayers' money.
3. Implementation Details: how could it be done
There are a few ways to transfer Bitcoin to the Strategic Reserve:
4. Price Expectations from a BSR launch
The launch of a Bitcoin Strategic reserve would have an enormous impact on market price.
This would happen through different mechanisms:
Having said that, assessing the precise impact of a BSR is quite tricky, but of course, the effect would be gargantuan.
A couple of predictions:
In this thread, I will explain what a Strategic Reserve is and How a Bitcoin Reserve is relevant.
1. Definition of a Strategic Reserve
2. The current proposal: B.I.T.C.O.I.N. Act
3. Implementation Details: how could it be done
4. Price Expectations from a BSR launch
5. Other Implementations around the world
6. Opinions and Thoughts from other stakeholders
7. Market Expectation
8. Links and documents
1. Definition of a Strategic Reserve
A strategic reserve is a stockpile of critical resources set aside by a government, large institution, or other entity for use in exceptional circumstances—such as emergencies, severe supply disruptions, wars, or periods of extreme market volatility.
Unlike regular inventories that cycle through daily usage, strategic reserves are intentionally maintained as a buffer against uncertainty, ensuring stability and security in times of crisis.
Strategic Reserves have a few characteristics that are unique and make them different from standard storage:
- Long-Term Storage: Strategic reserves are typically stored for extended periods and released only when severe disruptions occur.
- Critical Nature of Resources: The commodities or assets involved are essential to national security, economic stability, or societal well-being
- Controlled Access: Governments or top-level governing bodies usually oversee the maintenance, release, and replenishment of these reserves, guided by well-defined protocols.
For example, the United States currently has two principal Strategic reserves.
- Strategic Petroleum Reserve (SPR): after the oil crisis in the '70s, the US government decided to create a stockpile of oil administered by the US Department of Energy to be used both to protect the US economy against extreme market price fluctuations or as a reserve to provide power to the domestic industrial activities in case of a supply chain problem, or war. Currently, the SPR has more than 390 Barrels of oils (the maximum allowed capacity of the reserve is more than 700 million barrels) held in 4 salt Caves along the Gulf of Mexico for a valuation of about more than 27 billion, with the WTI trading at around 75$ per barrel.
- Gold Reserve : The US has the largest Gold Reserve in the world, with about 8,133.5 metric tons totalling almost 700 billion in value. Nearly 65% of those reserves are held at the United States Bullion Depository at Fort Knox.
The Federal Government owns the Gold. The Government has issued "Gold Certificates" to the Federal Reserve Banks for a total amount of $11 billion. This certificate serves The Federal Reserve Banks as a small portion of collateral for the Federal Reserve Notes. The Federal Reserve doesn't own Gold.
The US government has many other Strategic Reserves, including natural gas, grains, food, and cheese (it used to have raisins Reserves until 2015).
2. The current proposal: B.I.T.C.O.I.N. Act
Cynthia Lummis, a Republican senator from Wyoming, introduced the idea of a Bitcoin Strategic Reserve in July. She has advocated for the US government to consider Bitcoin as part of its long-term strategic reserves. In the US Senate, she named the bill BITCOIN (Boosting Innovation, Technology and Competitiveness through Optimized Investment Nationwide) Act.
Quote
July 31, 2024
WASHINGTON, D.C. – Following her announcement of a historic proposal to supercharge the US dollar and pay down the national debt by establishing a strategic Bitcoin reserve, today US Senator Cynthia Lummis (R-WY) officially introduced the Boosting Innovation, Technology and Competitiveness through Optimized Investment Nationwide (BITCOIN) Act in the US Senate.
"As families across Wyoming struggle to keep up with soaring inflation rates and our national debt reaches new and unprecedented heights, it is time for us to take bold steps to create a brighter future for generations to come by creating a strategic Bitcoin reserve," said Lummis. "Bitcoin is transforming not only our country but the world and becoming the first developed nation to use Bitcoin as a savings technology secures our position as a global leader in financial innovation. This is our Louisiana Purchase moment that will help us reach the next financial frontier."
The BITCOIN Act establishes a strategic Bitcoin reserve to serve as an additional store of value to bolster America's balance sheet and ensure the transparent management of Bitcoin holdings of the federal Government. Specifically, the legislation would:
SourceWASHINGTON, D.C. – Following her announcement of a historic proposal to supercharge the US dollar and pay down the national debt by establishing a strategic Bitcoin reserve, today US Senator Cynthia Lummis (R-WY) officially introduced the Boosting Innovation, Technology and Competitiveness through Optimized Investment Nationwide (BITCOIN) Act in the US Senate.
"As families across Wyoming struggle to keep up with soaring inflation rates and our national debt reaches new and unprecedented heights, it is time for us to take bold steps to create a brighter future for generations to come by creating a strategic Bitcoin reserve," said Lummis. "Bitcoin is transforming not only our country but the world and becoming the first developed nation to use Bitcoin as a savings technology secures our position as a global leader in financial innovation. This is our Louisiana Purchase moment that will help us reach the next financial frontier."
The BITCOIN Act establishes a strategic Bitcoin reserve to serve as an additional store of value to bolster America's balance sheet and ensure the transparent management of Bitcoin holdings of the federal Government. Specifically, the legislation would:
- Establish a decentralized network of secure Bitcoin vaults operated by the United States Department of Treasury with statutory requirements ensuring the highest level of physical and cybersecurity for the nation's Bitcoin holdings.
- Implement a 1-million-unit Bitcoin purchase program over a set period of time to acquire a total stake of approximately 5% of the total Bitcoin supply, mirroring the size and scope of gold reserves held by the United States.
- Be paid for by diversifying existing funds within the Federal Reserve System and Treasury Department.
- Affirm self-custody rights of private Bitcoin holders and emphasize that the strategic Bitcoin reserve shall not infringe upon individual financial freedoms.
Her proposals and public statements outline a vision in which the US treats Bitcoin similarly to other strategic assets—such as Gold—in its treasury holdings, which is getting an equal share of the world reserves under the US government control.
After the Trump Election, the idea gained traction:
The Bitcoin Strategic Reserve Would be enacted via a taxpayer-neutral operation, enabling the Government to acquire 1 Million Bitcoins, hodling it for at least 20 years:
- The reserve would be funded by marking the Fed's gold certificates to market value and selling them.
- The Government would use the surplus to buy Bitcoin without using Taxpayer money.
- The Department of Justice would transfer the 208,000 Bitcoin from the Silkroad Case to the SBR.
- The Government will buy 200,000 bitcoins annually for four consecutive years.
- The minimum hodling period would be of 20 years.
The "new" idea concerns repricing the Federal Reserve Certificates at mark-to-market valuations: the certificates were issued at a statutory gold price of $42.22/oz in 1973 and could now be valued at over $2,600/oz.
The gains obtained by this adjustment would enable spending without creating new debt, resulting in a neutral move regarding taxpayers' money.
3. Implementation Details: how could it be done
There are a few ways to transfer Bitcoin to the Strategic Reserve:
- Transfer Bitcoins seized to the FED. The Department of Justice owns 208,000 bitcoins seized from the SilkRoad trial. The bulk of the SBR could be instated by transferring those coins to the FED.
- Open Market Purchases: The Government would buy the Bitcoin in the market, presumedly via a partnership with Coinbase. This would be the fastest way of obtaining bitcoins, yet the less efficient. For sure, the slippage in this, or the market movement against the buying pressure, would be the highest
- Strategic Partnership with US Miners: this would be an ingenuous way of doing so. The Government could buy the Bitcoins mined in the US at an average price. This would benefit the miners with a stable price and the Government limiting the market impact. The Government could also collect taxes from mining firms directly in BTC and offer these subjects grants to tilt their electricity balance toward carbon neutrality via renewable energy sources or even facilitate ERCOT-style agreements with local grids. This perfectly aligns with Donald Trump's visions on the industry
:
Creating this kind of partnership with the private sector would benefit both the parties involved and the industry as a whole.
4. Price Expectations from a BSR launch
The launch of a Bitcoin Strategic reserve would have an enormous impact on market price.
This would happen through different mechanisms:
- Direct market impact: the buys would impact the market, directly affecting sellers. This could be somewhat mitigated through sophisticated buying strategies, as we have seen, but would dramatically change market microstructure anyway.
- Indirect Market Impact: The launch of the first BSR would have very strong signalling toward other sovereign authorities, opening the race for the second BSR announcement. There will be a flywheel spinning, attracting other National Bank toward Buying bitcoin, like today there is a race to buy Gold.
- Model-induced Buying: The opening of BSR-induced buying is necessary to propel Bitcoin in the next phase of growth, something that is necessary for all the bullish models around (be it Stock to Flow, Power Law or S-Curve approach) to see their prediction come true. As long as those models are not "negated," the framework is bullish.
Having said that, assessing the precise impact of a BSR is quite tricky, but of course, the effect would be gargantuan.
A couple of predictions:
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