The recent re-election of Donald Trump sparked discussions on its ambitious proposal to establish a national strategic plan Bitcoin reserve, but what would it look like? Is this even feasible?

Following a second Trump presidency, a national Bitcoin reserve has the potential to reshape not only the US financial landscape, but also the global cryptocurrency market. Already, the “Trump effect” has established Bitcoin as eighth largest asset in the worldexceeding the money.

Can Trump make the United States the “crypto capital of the planet”?

During his campaign, President-elect Donald Trump announced his commitment to making the United States the “crypto capital of the planet” and declared its intention to create a national Bitcoin reserve.

At a July Bitcoin conference in Nashville, Tennessee, Trump discussed his plans to use the government’s existing Bitcoin holdings – currently estimated at around 200,000 BTC, worth around $18 billion , mainly seized during criminal activities – to establish this reserve.

Senator Cynthia Lummis, a Bitcoin advocate, was one of the main supporters of this initiative. It introduced the Bitcoin Act in July 2024, proposing a decentralized network of secure Bitcoin vaults managed by the U.S. Department of the Treasury.

The law provides that the government can acquire up to 200,000 BTC per year over five years, potentially accumulating a total of 1 million BTC, or approximately 5% of the total Bitcoin supply.

After Trump’s victory, Lummis expressed his enthusiasm on X (formerly Twitter), assignment: “WE WILL BUILD A STRATEGIC BITCOIN RESERVE”.

Is a strategic Bitcoin reserve “highly unlikely”?

Some financial experts offer a cautious outlook. Dr. Arash Aloosh, assistant professor of finance and financial technology at Dublin City University, Ireland, expressed skepticism about the feasibility of such a reserve.

“The concept of a ‘strategic Bitcoin reserve’ in the United States would be revolutionary, but it is highly unlikely under current conditions,” Aloosh said. News week.

“Establishing such a reserve would mean that the US government would formally support Bitcoin, potentially directing public funds to it and approving it as a national asset, which goes against the cautious stance that the government has adopted so far on cryptography,” he added.

Aloosh highlighted several challenges, including regulatory hurdles, saying “significant regulatory changes would be necessary, with buy-in from several conservative agencies wary of high-volatility decentralized assets.”

Bitcoin’s limited market capitalization (still less than $2 trillion) “does not provide the investment capacity or stability needed for a reserve asset,” while “large-scale purchases could drive up prices , creating additional costs and market distortions,” he explained.

Aloosh also cited debt considerations, with the government currently running a budget deficit of around $1.8 trillion. “It’s hard to imagine Trump borrowing even more, let alone from China, to invest in a volatile asset like Bitcoin.” China holds approximately $775 billion in U.S. Treasuries.

Trump as a catalyst for crypto adoption

On the other side of the debate, Songping Que, senior director of blockchain-based crypto and applications platform Neo Blockchain, sees the creation of a strategic Bitcoin reserve as a potential catalyst for significant market growth.

“A strategic Bitcoin reserve fund established by the US government will be the catalyst that allows Bitcoin’s price trajectory to reach the highest level of analyst projections, with some predicting Bitcoin to reach $500,000,” he declared. News week.

Que said US adoption would encourage institutional investors, including pension funds and sovereign wealth funds, to enter the sector. “We have already seen the significant impact on the Bitcoin ETF (exchange traded fund) market: a US strategic reserve fund for Bitcoin will fuel the historic rise in Bitcoin prices,” he added.

Que also said that Trump’s election has now validated cryptocurrency in the eyes of global investors. “The outcome of the US presidential election confirmed that crypto is a mature asset class. Bitcoin and other cryptocurrencies have been closely followed to gauge the changing sentiment of global financial markets regarding the “impact and results of a Trump presidency,” he said.

State-Level Momentum: Pennsylvania’s Bitcoin Initiative

Trump’s proposal is gaining traction at the state level. On November 14, 2024, Pennsylvania lawmakers introduced the Pennsylvania Bitcoin Strategic Reserve Act, which would allow the state Treasury to allocate up to 10% of its approximately $7 billion in state funds to Bitcoin.

This bill is the first of its kind and represents a significant shift toward recognizing Bitcoin as a viable asset for state investment portfolios.

Republican state Rep. Mike Cabell, sponsor of the bill, said Fox Business: “The Pennsylvania Bitcoin Strategic Reserve Act is a visionary step toward securing our state’s financial future.”

“By integrating Bitcoin into our reserves, we are not only protecting Pennsylvania from the relentless impact of inflation, but we are also positioning our state as a leader in financial resilience and innovation.”

Widespread adoption of Bitcoin remains far away

Laith Khalaf, head of investment analysis at AJ Bell, urged caution regarding Bitcoin’s volatility and its suitability as a reserve asset. “While the price of Bitcoin is currently in great shapeIn the past, we have seen strong performance that quickly gave way to dramatic price declines,” he said. News week.

“This in itself poses a major barrier to consumer and business adoption of Bitcoin as a medium of exchange and harms the long-term investment case for crypto,” Khalaf added.

Ultimately, Khalaf, like many people cautious about cryptocurrencies, questioned the desirability of widespread adoption of Bitcoin: “If you think this is the future of currency despite volatility, consider whether you would be willing to be paid by your employer or billed by your mortgage provider in cryptocurrency.

“Central banks are also considering launching their own digital currencies, which could well undermine the use of Bitcoin except for diehards who want to stick to the man,” he added.

News week contacted Donald Trump by email for comment.