How to understand the 'only store, not buy' BTC strategic reserve signed by Trump?

Author: Alex Xu

Just now, crypto and AI czar David Sacks tweeted that Trump signed an executive order to establish a Strategic Bitcoin Reserve, with the main content being:

The reserve is based on the existing BTC controlled by the federal government, and subsequent forfeited BTC will also enter the reserve.

These BTC will not be sold (at least during Trump’s term)

The government will not create a separate budget (meaning “budget-neutral” in the original text) to purchase BTC.

Trump fulfilled his promise

How to understand the above message? I think there are mainly the following points:

1. This ‘Strategic Bitcoin Reserve’ is not the same as the ‘Strategic Federal Reserve’ bill promoted by Senator Cythia Lummis at the federal level. The former can be directly controlled by the government, while the latter requires congressional legislation; the former does not have a separate budget for purchasing BTC (increases would require congressional approval), while the latter would provide a separate budget for buying BTC, with the goal of buying 1 million in 5 years, and the source of the budget may come from a reassessment of the value of the existing US gold reserves, expanding the Fed’s asset count to provide a budget for the Treasury to buy BTC. David Sacks’ statement that ‘the government will not purchase other assets for reserve asset acquisitions’ does not mean that the public impression of the Bitcoin Strategic Reserve suddenly becomes something that relies solely on fines, without separately spending money to buy BTC.

Can the above executive orders explain that Trump has fulfilled his ‘promise’? At the administrative level, yes. Because Trump’s capabilities at the administrative level are limited, what he said during the campaign, such as establishing a BTC strategic reserve (at the administrative level), forming a dedicated crypto advisory council, firing\forcing out former SEC chairman Gensler, and relaxing industry regulations, have all been done. However, at an overall level, the promise has not been completely fulfilled. Trump explicitly stated during the campaign that he also needs to establish a Strategic Federal Reserve, purchase more BTC, which is also the content of the bill Senator Cythia Lummis is promoting in Congress.

Will Trump announce more news about BTC reserves or other bullish news? It’s possible. He will be the main speaker at the White House Crypto Summit held early tomorrow morning Beijing time. However, as mentioned earlier, he doesn’t have much power at the administrative level regarding BTC. The most extreme measure would be to order the Treasury Department to directly use the Exchange Stabilization Fund (The Exchange Stabilization Fund) to purchase BTC. This fund already exists and does not require additional approval from Congress. Its operational goal is to “stabilize the USD exchange rate.” However, as I discussed in my brief analysis of Trump’s promotion of SOL XRP ADA national reserves, Trump’s style is to achieve big results with small actions at low cost to make big news. He is unlikely to put in the effort for actions that require significant resources, face major obstacles, have little return, and involve high risks. Despite the fact that using the Exchange Stabilization Fund to buy BTC theoretically falls within his executive power, this concrete action is too extreme and could lead to many troubles. It may also interfere with Senator Cythia Lummis’ efforts to promote legislation in Congress (the two actions overlap).

4. What we need to pay attention to is that Trump’s emphasis on the “madman image” after taking office this time is even more prominent. Externally, it is manifested as wanton and arbitrary, hoping to make foreign diplomatic opponents feel that he is a lunatic who dares and will do anything, and thus gain political benefits through oppression. Internally, he constantly probes through various administrative actions, attempting to expand the boundaries of presidential power, including but not limited to a large-scale dismissal of DOGE and mandatory government employee furlough, and withholding government budgets approved by Congress. He is truly implementing the “one-dollar president route,” on the one hand, highly obedient to his cabinet’s support, and on the other hand, the Supreme Court’s ruling last July that the president “enjoys absolute immunity from criminal prosecution when exercising executive power” also gives him greater confidence. Therefore, it is not ruled out that Trump may change his tune and make more exaggerated favorable promises when facing a large rebound of public opinion on cryptocurrencies in the future, but the feasibility of implementation is also questionable.

5. The major trend of Bitcoin entering the national treasury, although hindered, is still slowly progressing. The key focus we still need to pay attention to is the formal progress of the Federal Reserve Act, and the progress of Bitcoin reserve acts in various states. For details, see ‘2.26 Web3 Investment Memo, also on key progress of Bitcoin reserve acts’.