Trump Ally Proposes Selling Gold Reserves to Buy Bitcoin, US to Establish "Strategic Bitcoin Reserve"?

Trump Ally Proposes Selling Gold Reserves to Buy Bitcoin, US to Establish "Strategic Bitcoin Reserve"?Amidst Trump's upcoming bid for a second term in the next Congress, his ally, US Senator Cynthia Lummis, has put forward a bold proposal: to establish a "strategic bitcoin reserve" as proposed by Trump, by selling off a portion of the Federal Reserve's gold reserves and using the proceeds to purchase Bitcoin. This plan has sparked heated debate, and market reaction to the proposal has been mixed

Trump Ally Proposes Selling Gold Reserves to Buy Bitcoin, US to Establish "Strategic Bitcoin Reserve"?

Amidst Trump's upcoming bid for a second term in the next Congress, his ally, US Senator Cynthia Lummis, has put forward a bold proposal: to establish a "strategic bitcoin reserve" as proposed by Trump, by selling off a portion of the Federal Reserve's gold reserves and using the proceeds to purchase Bitcoin. This plan has sparked heated debate, and market reaction to the proposal has been mixed.

Lummis's bill proposes that the US buy 1 million bitcoins, which translates to approximately $90 billion at current market prices. Theoretically, the Federal Reserve's gold reserves are sufficient to purchase 1 million bitcoin, with even some funds remaining after. The bill also mandates that the government retain approximately 200,000 bitcoins seized from prior asset forfeiture cases, and hold them for at least 20 years. The expected growth in their value is anticipated to contribute to reducing the national debt. Lummis argues that the impact on the US balance sheet will be neutral, as the US already holds financial assets in the form of gold certificates, which can be converted into bitcoin.

However, despite the widespread market expectation of a Trump presidency ushering in an unprecedentedly friendly environment for cryptocurrency, Lummis's bill faces challenges. Some market observers believe that the bill could lead to a significant surge in Bitcoin prices, even prompting other countries to follow suit, ultimately triggering a global cryptocurrency reserve race. Michael Novogratz, billionaire head of GalaxyDigital, predicts that Bitcoin prices could skyrocket to $500,000 if the US truly establishes a bitcoin reserve.

James Mackintosh, veteran market columnist for The Wall Street Journal, adopts a more cautious stance. He argues that the "strategic national-level bitcoin reserve" that Trump promises may not align with the US's economic needs. Mackintosh points out that Bitcoin is inherently largely unregulated, and relaxing regulations could lead to a flow of funds from the Bitcoin market to other cryptocurrencies, ultimately hindering Bitcoin's development.

Lummis first introduced the bill at the 2024 Bitcoin Conference in Nashville in July, shortly after Trump announced his plans for a bitcoin reserve. Notably, since Trump's election victory, the cryptocurrency market has soared. Bitcoin reached a new all-time high on Wednesday, briefly exceeding $93,000.

Despite the numerous challenges, Lummis remains optimistic about her "Bitcoin Bill." She believes that the bill will garner support in the next Congress, as Trump has already endorsed the concept of a reserve, and "a 'cavalry' of cryptocurrency supporters is arriving in Washington."

The introduction of Lummis's bill has sparked speculation within the market regarding the future direction of US government cryptocurrency policy. Whether the bill will be passed, and what impact it will ultimately have on the global cryptocurrency market, remain to be seen.