To put it mildly, the response in the cryptocurrency markets was not what the administration had anticipated. In the week that followed, the price of Bitcoin dropped by about $10,000 from over $92,000 at the time the order was signed. The order created a parallel “Digital Asset Stockpile” that included other cryptocurrencies, which to ardent Bitcoin supporters read as a dilution of the concept, and it did not order the government to purchase more Bitcoin, which contributed to some of the disappointment. The goal of the policy was to appease the cryptocurrency community. Rather, it demonstrated how challenging it is to appease a constituency that had been calling for precisely this kind of official embrace for years and then found it inadequate when it finally came.
The arguments supporting the strategic reserve rationale range from tenable to dubious, so it merits careful examination. The simplest case is this: since the government already owns the coins, holding them as a default makes sense because selling them in bulk would lower prices and possibly hurt victims awaiting compensation from forfeiture proceedings. That is a legitimate argument. Dumping $22 billion worth of Bitcoin on open markets would cause prices to fluctuate in ways that would be detrimental to everyone, and the legal process surrounding criminal forfeiture is slow. However, it is more difficult to defend the broader claims, such as that a Bitcoin reserve will help reduce the national debt, strengthen the dollar, or establish the United States as a geopolitical leader in digital assets. George Selgin of the Cato Institute was direct about it: the scheme’s supporters have to keep trying because the list of arguments is lengthy, not because there are many good ones.
Although it’s not exactly a warning story, El Salvador’s experience offers a helpful contrast. In 2021, President Nayib Bukele made Bitcoin legal tender, supporting it with a $200 million government investment and a national digital wallet that gave each citizen $30 in Bitcoin. Technical issues, server crashes, a 20% price reduction at launch, and large-scale public protests that necessitated the use of riot police were among the early problems with the rollout. The percentage of people who regularly use Bitcoin for everyday transactions is less than 2%. The nation’s debt problem got worse. Eventually, the IMF intervened with a $1.4 billion bailout, imposing requirements meant to limit future government purchases of Bitcoin. The day after the deal was signed, Bukele shared a screenshot of another Bitcoin purchase on X with the caption, “It’s not stopping.” It was deemed consistent with the program’s flexibility by the IMF. It was dubbed something else by critics.
Observing all of this happening in several governments at once gives the impression that no one has fully figured out what sovereign Bitcoin ownership is really for. Through law enforcement, the U.S. government came to be in this position. El Salvador entered the fray for a variety of reasons, including ideology, aspirations for tourism, and Bukele’s unique style of techno-political theater. Before anyone outside the nation realized it had substantial holdings, Bhutan used hydroelectric power to mine covertly for years. China banned Bitcoin domestically, confiscated it from scammers, and currently owns about $13 billion worth of the cryptocurrency without a clear plan. These national strategies lack coherence. From a distance, they appear to be a worldwide trend, but they are actually a collection of mishaps, political gestures, and opportunistic seizures.
It’s difficult to ignore the fact that the world’s most powerful government currently possesses more of an asset that was specifically made to function outside the purview of governments than any other sovereign body. The pseudonymous Satoshi Nakamoto, who introduced Bitcoin in 2009 with the specific intention of creating money that states could not control, would have laughed at the irony. It is currently genuinely unclear whether the U.S. government’s use of its 328,000 coins represents a strategic insight or a complex accident. There is a reserve. A justification for it is still being put together.

The post The U.S. Government Is Hoarding More Bitcoin Than El Salvador. Nobody Is Sure Why appeared first on Creative Learning Guild.