At the time of writing, Bitcoin (BTC) is trading at $97,000, experiencing significant volatility over the past 24 hours. While Donald Trump’s election victory has raised hopes among crypto investors for reduced regulatory pressure in the U.S., the path forward might not be as straightforward as anticipated.
The Fed’s Bitcoin Reserve Proposal
Republican Senator Cynthia Lummis from Wyoming previously introduced a proposal aiming for the Federal Reserve to accumulate 1 million Bitcoin. Announced during the Bitcoin 2024 event, the plan envisioned bolstering the Fed’s reserves with BTC over time, potentially legitimizing Bitcoin further while tightening supply and increasing demand.
Trump’s backing of this initiative has fueled optimism, with investors flocking to buy BTC amid speculation that regulatory uncertainty could diminish and crypto-friendly figures might lead key institutions. In this optimistic scenario, Bitcoin could breach six-figure price levels, supported by initiatives like altcoin ETF approvals and the establishment of a Bitcoin reserve.
Challenges to the Bitcoin Reserve
Despite the excitement, significant obstacles stand in the way of the Fed creating a Bitcoin reserve. The Fed’s independence and opposition from leading economists present major hurdles. Additionally, the mechanics of implementing the proposal are fraught with complications.
The 2024 Bitcoin Act outlines a structure partially funded by transfers from the Federal Reserve to the Treasury. However, global investment advisor Gavekal highlights:
“The 2024 Bitcoin Act proposes a strategic Bitcoin reserve funded partially by transfers from the Federal Reserve to the Treasury. The issue lies in the Fed currently operating at a weekly loss exceeding $1 billion due to negative interest margins.
Even after returning to profitability, any surplus would first need to cover the Fed’s accumulated losses, currently at $212 billion, before funding Bitcoin purchases. This could take years.”
Additionally, experts question whether the reserve could be financed through gold revaluation or monetization, further complicating the feasibility of the plan.
Will Trump Deliver?
The debate around the Bitcoin reserve is set to dominate headlines in 2024. Observers are eager to see how Trump might revise the proposal or find alternative funding sources, such as reallocating the Justice Department’s 190,000 BTC holdings or exploring crypto-based taxation.
Regardless of the outcome, this topic will be central to the crypto narrative moving forward. For more updates, follow Dey There for in-depth insights.
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