The delusions behind a Bitcoin strategic reserve

Cynthia Lummis, a U.S. senator, has proposed a bill to create a "strategic bitcoin reserve," which would instruct the Treasury and Federal Reserve to acquire one million bitcoins over five years and hold them for at least 20 years. This initiative has gained traction, particularly among private bitcoin holders, as it suggests a state endorsement of bitcoin as a form of "freedom money." However, the bill raises critical questions about its practical implications and whether it would genuinely enhance financial resilience. Critics argue that a reserve of non-liquid assets like bitcoin does not provide the expected resilience, as it incurs storage costs without the ability to sell. While proponents believe that the value of bitcoin will appreciate over time, the bill does not convincingly demonstrate how this would benefit the U.S. economy or its monetary policy. The notion that bitcoin could serve as a hedge against institutional collapse is also debated, as historical trends show that traditional bank money tends to recover after crises. Ultimately, the proposed reserve may serve more as a strategy for bitcoin enthusiasts rather than a robust financial strategy for the U.S. government.

- Senator Cynthia Lummis proposed a bill for a U.S. bitcoin reserve.

- The bill aims to acquire one million bitcoins over five years.

- Critics question the practical benefits and resilience of holding non-liquid assets.

- The proposal may primarily benefit private bitcoin holders rather than the U.S. economy.

- Historical trends suggest traditional bank money tends to recover after crises.