Summary The executive director of the President's Council of Advisers on Digital Assets, Bo Hines, proposes leveraging gold reserves to buy Bitcoin despite its current poor performance. A proposed 2025 law could enable the US to acquire 1 million bitcoins over five years, potentially influencing Bitcoin's price. The White House may sell gold to buy Bitcoin, potentially triggering a price surge for Bitcoin in early 2025. Investment Thesis I recommend buying Bitcoin ( BTC-USD ). Investors were surprised last week with news that the White House may sell gold to buy Bitcoin. In this article, I intend to study in depth the possibility of replacing gold with Bitcoin in strategic reserves to unlock the price of bitcoin. As we know, Bitcoin is not performing well in early 2025, and perhaps this could be a trigger. To do this, we will make comparisons between gold and bitcoin in several instances and draw conclusions. How to Expose Yourself to These Assets There are many ways for investors to gain exposure to the price of Bitcoin, such as the iShares Bitcoin Trust ETF (IBIT), which has a management fee of 0.25% and $48 billion in assets under management. Another way to buy is through exchanges, where investors directly buy Bitcoin without an ETF. ETFs are also a way to gain exposure to the price of Gold. Retail investors typically choose the iShares Gold Trust (IAU) for its low management fee (0.25%), which currently has $41 billion in assets under management. Institutional investors tend to opt for the SPDR Gold Shares (GLD), which has a management fee of 0.40% and $82 billion in assets under management. White House Interested in Bitcoin? Last week, the White House's bold plan to take advantage of the gains from gold reserves and buy Bitcoin caught attention. The plan by the executive director of the President's Council of Advisors on Digital Assets, Bo Hines, comes at a time when Bitcoin is not showing good momentum. In this context, there is the Bitcoin Act of 2025, which would allow the US to acquire 1 million bitcoins, equivalent to 5% of the supply, over the next 5 years. The law has yet to be passed, but it could give the US some control over the price of the asset. Now, let's make some comparisons before drawing scenarios. Comparisons Between Gold and Bitcoin As we can see, the US has a much larger gold reserve than any other country, such as Russia, China and even Europe. The excellent performance of the gold price in recent years has, in fact, made these reserves much more valuable. Gold Reserves (TradingView) What about Bitcoin? In a survey from December 2024, Bloomberg identified the main holders of Bitcoin. Largest Bitcoin Holders (Bloomberg/Eric Balchunas) Finally, we can compare gold with Bitcoin and other assets. Below, we can see that bitcoin represents 1.3% of the global money supply and still has very little relevance compared to gold. Bitcoin Is Now 1.3% of Global Money (River) Although Bitcoin is not very representative compared to gold, we need to analyze the speed of adoption in ETFs of each one before drawing up scenarios. Let's look at the disparity. Gold vs. Bitcoin: ETF Inflows by Year (Data from ETF.com as of January 10, 2025) From now on, we will analyze the adoption of Bitcoin rather than gold from different perspectives. Analysis From Different Perspectives Scarcity - Although gold is scarce, there is no clear limit to its supply. Additionally, the increase in price encourages greater exploration. As far as we know, Bitcoin is mathematically limited to 21 million units with a predictable issuance schedule, which ensures scarcity and protection against supply inflation. That said, investors looking for truly scarce assets can opt for Bitcoin. Performance - Over the past 5 years, gold has performed moderately, offering limited protection against inflation. Bitcoin, on the other hand, has performed surprisingly well. Investors looking for long-term momentum may also want to shift some of their investments from gold to Bitcoin. Price Return (Seeking Alpha) Custody and Storage - While gold requires physical storage, which is complex and subject to logistics and transportation costs, Bitcoin has a low-cost digital storage with cryptographic security, which facilitates movements. Once again, investors may be tempted to allocate part of their gold reserves to Bitcoin. Geopolitical Threats - Gold is a physical item , meaning it is subject to physical seizure in geopolitical conflicts. Bitcoin, on the other hand, allows for extremely secure transfers and custody to date, with no possibility of physical seizure. The above points draw a lot of attention to how Bitcoin can outperform gold as a strategic reserve. In my view, this will happen as volatility decreases and could reward Bitcoin holders. Seasonality and Price Although the start of the year is bad, we can analyze that Bitcoin has already had other bad starts to the year in 2018, 2019 and 2022, and this did not stop it from reaching historic highs at the end of 2024. Bitcoin Seasonality (MacroMicro) All valuations in this case are subjective, as we know. The chart below shows a heatmap of Bitcoin since 2010, and we can see that the months of April and May historically have better performances than March. If the crypto asset follows an average performance of April, the 27% upside would imply a target price of $104,900, which corroborates my buy recommendation. Bitcoin Heatmap since 2010 (Barchart) Potential Threats to the Bullish Thesis I have been faced with a risk that, I believe, is serious. Below we have the Bitcoin cycles after the halving. We are on day 340 of the fourth cycle; however, the performance has been much lower than previous cycles. Bitcoin Price After Halvings (Koyfin) I am afraid that a paradigm shift will occur. As Bitcoin becomes a safe haven asset for strategic reserves, its price tends to be less volatile and its returns will also be less volatile just as gold was after years and years of use. The Bottom Line As a renowned investor would say, buy on the cannons, sell on the trumpets. Gold is at an all-time high, and the signs that the White House itself may use the gains to buy Bitcoin are interesting. Bitcoin prices are not at all-time highs, but the context in which it is inserted is quite promising, with several characteristics that may make it an asset targeted for strategic reserves. Based on this analysis, I recommend buying Bitcoin. In my view, investors should pay attention to the promising prospects and the low price at which this promising asset is found. The risk/return ratio seems interesting.
