President-elect Donald Trump’s potential establishment of a national Bitcoin reserve is gathering steam with approximately 300 pro-crypto lawmakers preparing to take office. A report from nonprofit watchdog Public Citizen shows that crypto accounted for nearly half of all corporate money flowing into the election, making the U.S. appear poised for increasingly crypto-friendly policies.
Prediction market platforms are already pricing in the possibility of this historic shift. Event-market derivatives tracking the likelihood of Trump establishing a national Bitcoin reserve have gained significant traction on major platforms, with Kalshi and Polymarket showing notably divergent odds.
The market on Kalshi, with the resolution date set for January 1, 2026, suggests a 60% probability of the reserve’s creation. Meanwhile, the Polymarket market probability is at 30%, most likely because it focuses on Trump’s first 100 days in office.
The Bitcoin Strategic Reserve proposal
Senator Cynthia Lummis introduced The Bitcoin Act of 2024 in July, proposing the establishment of a Strategic Bitcoin Reserve. The bill outlines an ambitious plan: the U.S. government would purchase 200,000 bitcoins annually for five years, accumulating a total of 1 million bitcoins, nearly 5% of the total supply.
Lummis argues this reserve could help address the U.S. debt deficit by transitioning from a fiat-based to a bitcoin-based economic system.
Over five years, the United States will assemble one million Bitcoin, 5% of the world’s supply! #Bitcoin2024 pic.twitter.com/mPuqbq9RK8
— Senator Cynthia Lummis (@SenLummis) July 27, 2024
Michael Saylor, a prominent Bitcoin proponent and the executive chairman of MicroStrategy (MSTR), suggests that accumulating a significant Bitcoin reserve could substantially reduce the national debt. “A Bitcoin reserve could be one of the best ways to secure America’s future,” said Saylor.
Dave Birnbaum, VP Product at Coinbits.app, a cryptocurrency trading platform with a vested interest in Bitcoin’s adoption, describes the theoretical mechanism of how Bitcoin can lower national debt in Forbes as “a fascinating, if speculative, scenario.”
Simply put, the plan would work in two steps: first, the U.S. would print more dollars, causing inflation, while simultaneously buying up bitcoin. Then, as the dollar’s value falls and people rush to buy bitcoin instead, the government’s bitcoin holdings would become valuable enough to counterbalance the weakened dollar.
“A nuclear put”
However, this strategy carries unprecedented risks. Birnbaum himself acknowledges the potential chaos, likening it to accelerating toward a chasm with failed brakes, “hoping that by increasing your speed you might make the jump to the other side. The other side is bitcoin.”
Financial Times money journalist Brendan Greeley puts it more starkly: “A long-term bet on bitcoin is bullish on the permanent collapse of all institutions, everywhere. It’s a nuclear put.”
The implications are severe: betting on Bitcoin essentially means hedging against the U.S. dollar, the global reserve currency. Such a move could trigger worldwide economic destabilization.
Current adoption patterns are telling: El Salvador, which became the first country to adopt Bitcoin as legal tender in 2021 to improve its population’s access to financial services, has difficulty convincing its citizens to adopt the new payment technologies. In China, Bitcoin primarily served as a tool for wealthy individuals to bypass strict capital controls during economic downturns, though its use has since declined following the government’s cryptocurrency ban.
“Perhaps in a collapse, an asset like bitcoin could prove valuable,” Greeley notes. “Historically, however, bank money has re-emerged from the rubble of every catastrophe.”
This observation raises fundamental questions about whether the world’s largest economy should stake its future on a currency that has primarily thrived in unstable or restrictive economic environments.
A $100 billion bet
With the economy ranking as voters’ top concern, the political calculus becomes complex. With Bitcoin surging 40% in November and reaching its current price, the estimated cost of purchasing the cryptocurrency over the next five years—around $100 billion, excluding infrastructure and security expenses—raises significant questions about fiscal responsibility. Furthermore, such large-scale purchases would likely drive Bitcoin’s price higher, increasing the total cost.
David Yermack, a finance professor at NYU Stern School of Business who has taught cryptocurrency for a decade, calls the Bitcoin Strategic Reserve a “huge strategic mistake.”
“The basic problem with this idea of a Bitcoin reserve is that we already have a reserve currency, which is the U.S. dollar,” he explains. “It would destabilize the dollar if people actually did this. And it’s not in our interest to do that, far from it.”
Yermack further argues that taxpayers would likely oppose funding government Bitcoin purchases and warns that significant government involvement could undermine Bitcoin’s fundamental appeal: its decentralization.
While crypto advocates like Birnbaum urge quick action on the reserve, the four-year presidential term presents a crucial constraint. The short-term economic disruption predicted by Lummis’s proposal could prove politically untenable, even for a crypto-friendly administration.
Looking ahead
On one side, crypto advocates see a historic opportunity to revolutionize America’s monetary system, while traditional financial experts warn of potentially catastrophic risks to global economic stability.
Whether the incoming administration will embrace such a radical transformation may ultimately depend on factors beyond mere cryptocurrency enthusiasm.
As the debate continues, the open-ended nature of long-term prediction markets allows speculators to take various positions, both for and against the proposal, potentially profiting from the ongoing uncertainty surrounding the future of America’s financial system.
