Bitcoin is often said to be a kind of “digital gold” due to its scarcity, with its supply capped to a maximum of 21 million coins that will ever be produced. Advocates of Bitcoin argue that this limit makes Bitcoin a great anti-inflationary store of value, and now governments are increasingly taking the same view. Earlier this month, U.S. President Donald Trump signed an executive order to create a “strategic reserve” of Bitcoin, in line with his plans to ensure the country becomes a leading innovator in the crypto industry. Crypto supporters have hailed the President’s plan as a genius, while skeptics have argued that doing so will unnecessarily expose U.S. taxpayers to crypto markets' notorious volatility. But what is Trump hoping to achieve with a Bitcoin strategic reserve, and will it pay off? What is Trump’s Plan? Initially, at least, creating the strategic reserve won’t cost the U.S. government much money, as Trump’s order states that the almost 200,000 seized Bitcoins currently in the possession of federal agencies will be used to form it. That’s according to Trump’s “crypto czar” David Sacks, who explained that the government doesn’t intend to sell any of the BTC deposited into the reserve. Instead, it will be retained as a “store of value”, he added. “The Reserve is like a digital Fort Knox for the cryptocurrency often called 'digital gold,'" Sacks said in a post on X, referring to the Kentucky-based fortress where the U.S. keeps most of its physical gold reserves. Trump’s order calls for federal agencies to conduct a full audit of their Bitcoin holdings, which is something that Sacks says has never been done before. According to him, the federal government has sold around 195,000 Bitcoins that were seized as a result of criminal activity over the last decade for around $366 million. Had the government not sold those assets, they would now be worth around $17 billion, he added. In addition, Trump’s order also enables the U.S. Commerce and Treasury departments to create “budget-neutral strategies” for the acquisition of even more Bitcoin. Interestingly, the proposed reserve won’t just hold Bitcoin, but also other cryptocurrencies such as Ether, Solana, Cardano, and XRP. Trump, who previously railed against crypto during his first presidential term, has pivoted to become the most crypto-friendly President in history. He first pledged to create a Bitcoin reserve last year during an election trial appearance at the 2024 Bitcoin Conference in Nashville, Tennessee. What is a strategic reserve? Strategic reserves are created by governments around the world to stockpile what they believe are vital resources, primarily to create a safety net should problems ever arise. For instance, the U.S. Strategic Petroleum Reserve is meant to ensure the country has access to a regular supply of oil during times of crisis or war. It also has stockpiles of foods like grain to protect against food shortages, as well as vaccines and also gold. In the U.S. Bullion Depository at Fort Knox, the U.S. government holds approximately 8,133 metric tons of gold In more recent times, the U.S. and other governments have sought to create reserves of critical minerals required for technologies and energy resources. As for Bitcoin reserves, the first country to establish one was El Salvador in 2021, when it also made BTC a legal tender. Alongside the creation of the reserve, El Salvador has sought to position itself as a welcoming place for crypto-focused businesses to set themselves up, with favorable regulations being developed. Despite criticism from bodies like the International Monetary Fund, El Salvador’s decision has clearly been paid off, with Finbold reporting in Nov. 2024 that its reserve had accumulated an unrealized $200 million profit due to Bitcoin’s price increases over the last year. El Salvador's move is further justified by reports that Brazil, Japan, Russia and Switzerland are also considering creating their own Bitcoin strategic reserves. Beyond these governments, a number of publicly-traded companies have also amassed substantial BTC holdings, chief among them MicroStrategy, which held more than 499,999 BTC worth around $45 billion as of Mar 1, 2025. What Benefits Will It Bring? The most important question regards what benefits such a reserve will bring to the U.S. government and its citizens. Proponents of the strategy argued that a crypto-based reserve would help the federal government to improve its financial stability by diversifying its assets beyond traditional stores of value such as gold, bonds, and foreign currencies. There is, of course, significant potential for price appreciation over the long term, given that the value of Bitcoin has always been on an upward trajectory ever since it first appeared in 2009. By creating a national stockpile, the U.S. government would also be helping to bring further legitimacy to crypto assets, encouraging more financial institutions to diversify into them. At present, many institutional investors continue to be wary of digital assets. In turn, greater legitimization could promote more investment in the U.S. crypto sector, leading to the creation of more jobs. Could DeFi be an option? Perhaps the biggest benefit of holding Bitcoin is its potential to be invested through so-called decentralized finance protocols, which allow digital asset holders to generate significant returns on their crypto holdings. Bitcoin-based DeFi is a relatively new development, as it was not compatible with the earliest DeFi protocols due to its lack of programmability, but recent updates to its codebase have changed that. Through protocols like Babylon , it’s possible to “stake” Bitcoin, which involves locking the asset into a smart contract to secure other blockchain networks. By doing so, investors can earn substantial rewards, especially if they “lock” their BTC for longer periods. Bitcoin can even be “restaked” through newer protocols such as SatLayer , where the restaked BTC is used to secure Bitcoin Validated Services, or decentralized applications that are backed by the security of the Bitcoin blockchain. By restaking Bitcoin through SatLayer, investors can earn regular rewards paid out in BTC. BVSs are intriguing for dApp developers as they provide them with strong foundational security for their applications at launch, which is not the case when they have to build their secure network. The concept has proven to be quite popular, with SatLayer accumulating more than $285.9 million in total value locked. There are many other ways to invest in Bitcoin too, with protocols like Zeus making it simple to bridge BTC to the Solana blockchain and use it in that network’s growing DeFi ecosystem. It remains to be seen if the U.S. government will go down the DeFi route with its Bitcoin strategic reserve, but for many crypto investors, it makes sense to do so, as it allows them to generate a passive income rather than just sitting on those assets. Ultimately, the U.S. government’s strategy for using its Bitcoin strategic reserve will likely be guided by market conditions and crypto’s evolving role in the broader financial economy. The more mainstream crypto becomes, the more options it will have on how to put those funds to work. Disclaimer: This article is provided for informational purposes only. It is not offered or intended to be used as legal, tax, investment, financial, or other advice
