The price of Bitcoin has soared to a new record high, surging past $106,000, amid Donald Trump’s plan to establish a U.S Bitcoin strategic reserve.
This announcement fueled optimism among crypto investors that saw the price of BTC skyrocket to a new high after surpassing the $100,000 milestone.
Bitcoin hit a record of $106,509, currently trading at $104,329 as at the time of writing this report. Ethereum also rose 4%, climbing to just below the key $4,000 level. The broader crypto market according to CoinDesk rose by 4%.
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Speaking on his plan to create a Bitcoin reserve in the U.S, Trump said,
“We are gonna do something great with crypto because we don’t want China, or anybody else but others are embracing it and we want to be ahead”. Trump said in response to a question about whether the U.S. will create a Bitcoin strategic reserve similar to its oil reserve.
In line with this, Republican Crypto-friendly Senator Cynthia Lummis has introduced a bill to Congress to establish a Bitcoin reserve that, if passed, would see the government purchase 1 million of the digital tokens, or about 5% of the global supply, over five years.
Notably, proponents of creating a national Bitcoin reserve argue that doing so could help reduce the U.S. national debt without raising taxes and could strengthen the dollar by diversifying U.S. government holdings.
Meanwhile, while several analysts have lauded Trump’s plan to create a national Bitcoin reserve, it has been met with criticism. Former US treasury secretary Larry Summers says Trump’s idea to create a national Bitcoin reserve is ’crazy’. While Summers said he understood the need to stockpile other resources like gold and oil, he portrayed Bitcoin as a “sterile inventory” and Trump’s proposal for a strategic Bitcoin reserve as merely political. “There’s no reason to do that other than to pander to generous special-interest campaign contributors,” he added.
Also criticizing Trump’s plan, American stockbroker and financial commentator Peter Schiff wrote on X,
“If the U.S. government actually established a #Bitcoin reserve and bought 1 million Bitcoin, it might end up buying millions more. Since the U.S. government’s purchase of 1 million Bitcoin would drive the price so high, many HODLers, then worth millions or billions, would finally begin cashing out to spend their windfalls. That would cause the market to crash, forcing the U.S. government to print even more dollars to buy more Bitcoin to prevent the price from crashing, thereby diminishing the value of its Bitcoin reserve. Of course, a reserve of something you can never sell and must continuously buy is worthless as a reserve.
“To maintain the pretense that its Bitcoin reserve has actual value, the U.S. government would be forced to keep buying, destroying the value of the dollar in the process. This would mean Bitcoin prices would keep rising, and the U.S. government would have to print even more money to buy more Bitcoin. Ultimately, so many dollars would be printed to buy Bitcoin that the U.S. would experience hyperinflation, rendering the dollar completely worthless.
“Once the dollar is worthless, the U.S. could no longer keep buying Bitcoin. Instead, it would have to sell all the Bitcoin it holds to try to pay its bills, leading to the complete collapse of Bitcoin. In the end, Bitcoin would have succeeded in destroying the dollar. But the victory would be short-lived, as Bitcoin would be destroyed along with it. At least those who sold to the U.S. government to buy real assets would be rich. The people who never sold their Bitcoin, or kept their savings in dollars, would be completely wiped out.”
Several other skeptics of the Bitcoin reserve plan say that using tax dollars to buy a volatile asset such as Bitcoin could put the government and U.S. citizens at risk.
Meanwhile, investors’ optimism about Trump’s friendliness toward crypto, has continued to intensify, despite criticism, which has helped push the price of Bitcoin to a new high. Bitcoin has surged more than 50% since the November 5 election that saw Trump elected along with many other pro-crypto candidates.
The broader crypto market has been buoyed by hopes of a more favorable regulatory environment under the incoming Trump administration.