As a seasoned financial analyst with over two decades of experience under my belt, I have witnessed the ebb and flow of global economic trends like a sailor navigating the open sea. The recent announcement by Senator Cynthia Lummis to establish a strategic Bitcoin reserve has certainly sent ripples through the financial world, much like tossing a pebble into a calm pond.
US Senator Cynthia Lummis, often referred to as the “Bitcoin Queen” on Capitol Hill, has added an unexpected twist to the post-election excitement by disclosing intentions to create a tactical Bitcoin reserve.
Making such a daring decision, announced mere hours following Donald Trump’s re-election, has the potential to reshape America’s financial approach; however, it also sparks doubts regarding its practicality, possible consequences for the national debt, obstacles in policy implementation, and potential market turbulence.
Over time, the U.S. has traditionally relied on its vast gold reserves to maintain and fortify the strength of the dollar. As we stand in September 2024, the U.S. possesses approximately 8,133 metric tons of gold, significantly more than Japan’s 845 tons and an estimated 2,113 tons from China. The Eurozone as a whole holds roughly 10,784 tons.
Large quantities of gold, particularly physical gold, are prized for their ease of conversion into cash, safety, and contribution to national economic solidity. On the other hand, a hypothetical Bitcoin reserve amounting to $200 billion would only account for around 2.5% of the current global value of gold reserves, which brings up doubts about its strategic importance.
How a Bitcoin reserve could be implemented
In simpler terms, it’s possible that the recently inaugurated Trump-Vance government might decide to use an executive order to assign certain funds for buying Bitcoins, through the U.S. Treasury.
2022 saw President Biden approving the distribution of 180 million barrels from the Strategic Petroleum Reserve in response to escalating fuel costs. Similarly, if Bitcoin is viewed as a strategic asset instead of just a currency, it could potentially bypass some regulatory obstacles.
It is probable that maintaining a substantial and continuous Bitcoin reserve would necessitate approval from Congress, given its multi-year budgeting implications. Regardless of Trump’s favorable views on cryptocurrency, resistance from traditionalist lawmakers within Congress who may consider Bitcoin too volatile or speculative for national reserves could potentially delay this plan.
From an operational standpoint, the U.S. Department of the Treasury might oversee Bitcoin reserves in a manner similar to its management of gold. This Bitcoin would be procured through a variety of funds distributed across the Federal Reserve System.
This proposed action may encounter significant hurdles due to the possibility that both the Senate and House committees might closely examine the potential risks associated with incorporating such a high-risk asset onto our national ledger, given the bipartisan apprehension regarding cryptocurrency’s long-term reliability.
Proposal will unlikely be implemented over the next two years
1 Way: Despite ongoing worries about inflation, proposals regarding Bitcoin may encounter opposition from both the general public and government officials. However, it’s crucial to note that a hypothetical $200 billion Bitcoin fund would only represent a tiny portion of the current US debt, which stands at an astonishing $35.9 trillion dollars.
It seems doubtful that this particular proposal will win sufficient backing from lawmakers in the short run, given that it requires extensive congressional support. To put it simply, major asset acquisitions would necessitate cooperation from Congress, which makes a comprehensive implementation of such a plan unlikely over the next two years. Executive orders can only take limited government actions.
The new government is currently weighing this idea, and whether or not Bitcoin becomes a national reserve asset could hinge on finding the right blend of financial tactics and practical politics. At present, it seems that Bitcoin’s road ahead is still filled with challenges.
This article serves as a source of general knowledge and shouldn’t be interpreted as legal or financial guidance. The perspectives, ideas, and opinions within this piece belong solely to the author and may not align with those held by CryptoMoon.
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2024-11-07 00:18