Analysts Suggest Strategies U.S. Can Adopt to Acquire More Bitcoin Amid Crypto Reserve Strategy

On March 7, Jiang Jinze, analyst and founder of Muse Labs, responded to the U.S. government’s Bitcoin reserve strategy, which ruled out direct BTC purchases. He noted that selling gold to increase Bitcoin holdings, amongst other options, is now officially on the table.

This method would be budget-neutral, meaning it wouldn’t require new funds, as the proceeds from gold sales could be used to acquire Bitcoin indirectly.

Jiang Jinze Questions the U.S. Reliance on Bitcoin Forfeitures

In a detailed X post, Jiang Jinze expressed concerns about the U.S. government’s decision to build its Bitcoin reserve solely on seized BTC from criminal and civil forfeiture cases.

While Trump’s crypto Czar, David Sacks, noted that the U.S. government holds around 200,000 BTC, Jiang Jinze pointed out that only 100,000 BTC are true reserves. This is because nearly half of the confiscated Bitcoin must be returned to Bitfinex, the exchange that suffered a major hack in 2016.

In that incident, hackers stole approximately 120,000 BTC, and after years of investigation, law enforcement recovered a substantial portion of the stolen funds. Since these Bitcoins rightfully belong to Bitfinex and its affected users, they are not part of the government’s actual reserves.

https://twitter.com/scottmelker/status/1897814636486877300

Additionally, he noted that most of the remaining confiscated Bitcoin was seized when its value was much lower, and acquiring such a large amount through future confiscations may take much longer.

His perspective aligns with recent frustrations expressed by David Sacks over the Biden administration’s sell-off of 195,000 BTC for just $366 million, which would be worth over $17 billion today.

Alternative Strategies for Expanding U.S. Bitcoin Reserves

Jiang proposed three alternative strategies to expand the U.S. Bitcoin reserves without new fiscal expenditures.

First, he suggested redistributing existing assets. He pointed out that the most viable source of incremental funds would be revenue generated from gold reserves or Federal Reserve deposits.

The Fed’s earnings are turned over to the U.S. Treasury and categorized as general revenue, making them difficult to use for Bitcoin acquisition.

As a result, selling gold appears to be the most realistic option. Other assets, such as land, buildings, and licenses, could also be liquidated, but the federal government’s holdings in these areas are limited and largely negligible.

His second strategy involved reinvesting tariff revenues, allowing the government to buy Bitcoin without increasing spending. However, this option seems unlikely in the near term, as the Commerce Secretary has already ruled out using tariff income for the national crypto reserve plan.

Finally, Jiang proposed using idle resources, such as federal data centers and underused energy sources, for Bitcoin mining.

While he cited Bhutan’s state-supported mining as an example, he acknowledged that this approach would yield minimal returns, as 95% of Bitcoin has already been mined.

Matrixport Reiterates Gold Selloff to Fund Bitcoin Reserves

Adding to the discussion, Matrixport, Asia’s largest all-in-one crypto services hub, suggested that the U.S. government could tap into gold reserves to fund Bitcoin purchases under a Strategic Bitcoin Reserve plan.

U.S. Senator Cynthia Lummis’ BITCOIN Act proposes using gold’s $688 billion market value to acquire 1 million BTC over five years, potentially by selling gold. Matrixport estimates that selling 15% of reserves could yield $110 billion, enough for 1.05 million BTC at current prices.

However, they cautioned that such a large-scale Bitcoin purchase would likely drive prices higher, making accumulation more expensive over time.

The White House Crypto Summit and the Future of U.S. Bitcoin Policy

Matrixport also projected that today’s White House Crypto Summit could shape U.S. crypto policy for the next four years.

The summit is also expected to reaffirm the administration’s commitment to simplifying crypto regulations, opposing central bank digital currencies (CBDCs), and positioning the U.S. as a global blockchain leader.

Despite this, many crypto investors and industry players have expressed disappointment with the announced Bitcoin reserve strategy, which triggered a sharp bearish trend for BTC .

Spencer Hakimian, founder of New York-based Tolou Capital Management, called the plan underwhelming. At the same time, another crypto supporter noted that Trump’s pro-crypto campaign had suggested the government would actively accumulate Bitcoin over time.

The new approach, which prioritizes securing existing holdings rather than expanding them, has left some feeling it falls short of those expectations.

Frequently Asked Questions (FAQs)