What would happen if the United States really bought 1 million BTC?

By David Canellis, Blockworks; Translated by Deng Tong, Golden Finance

The U.S. government has four official reserve assets. Why shouldn’t Bitcoin be the fifth?

If pro-Bitcoin Senator Cynthia Lummis has her way, the U.S. government will buy one million Bitcoins ($67.7 billion) over five years to fill the treasury with a strategic Bitcoin reserve managed by the U.S. government.

President Donald Trump proposed a plan at the Bitcoin 2024 conference in Nashville that would prevent the U.S. from selling any seized Bitcoin.

Trump would prefer the U.S. to hold its remaining 213,240 Bitcoins ($14.85 billion) indefinitely, which authorities have seized from various criminal cases such as the Silk Road and Bitfinex hacks.

He did not propose an official strategic reserve in an upcoming congressional bill, as Lummis said he would.

If the US starts considering Bitcoin as an official reserve asset (which is unfortunately unlikely), then as things stand, the seized Bitcoin would account for 1.74% of the US total official reserves ($14.85 billion out of $854.3 billion at current prices).

Gold is by far the largest reserve asset in the US. Or, more precisely, gold certificates. The United States currently holds dollar-denominated certificates for nearly 261.5 million ounces of pure gold. The Federal Reserve sets the value of these certificates at $42.22 per ounce, a legal price that has been set by law since 1973. Gold is currently trading at nearly $2,400, so the market value of the Fed's gold certificates is $608.35 billion. There are also $166.21 billion in claims on Special Drawing Rights (SDRs), a reserve asset maintained by the International Monetary Fund. The SDR is a liquidity pool, currently worth $943 billion, from which countries can draw. It is made up of a basket of international currencies, including the dollar, euro, renminbi, yen and pound sterling.

US reserves also include $35.2 billion in foreign exchange, denominated in euros and yen, and another $29.6 billion that can be withdrawn from the IMF at short notice (separate from the SDR pool).

The US also keeps strategic reserves of other valuables, including oil (374.4 million barrels, market value $29.9 billion). But oil is not an official reserve asset like gold and foreign currencies.

If Lummis's plan becomes a reality, the US reserves will look like this.

It is difficult to predict the future, as this would require predicting the price of Bitcoin. However, her buying strategy can be implemented over the past five years.

In this scenario, Bitcoin would become the third-largest reserve asset in the U.S., after gold and SDRs. The orange line shows when the purchases began.

If Lummis had started planning to buy 1 million BTC five years ago, and bought the same amount of BTC every month, the U.S. would now have $69.44 billion worth of Bitcoin, including its seized criminal reserves.

The real problem is that the US “only” spent $31.4 billion to buy 1 million BTC, which equates to an unrealized profit of 120%.

This still requires some market luck. But maybe Lummis is on to something.