Establishing a national Bitcoin (BTC) strategic reserve may create negative market impacts for BTC and the US dollar, according to Haider Rafique, global managing partner for government and investor relations at crypto exchange OKX.
Rafique told Cointelegraph that any government holding significant portions of the BTC supply could manipulate prices by dumping its holdings onto the market, thereby disrupting the core proposition of BTC as neutral, decentralized money.
He asked: “What happens in a few years if a new administration decides this was a bad idea?” Rafique added:
“Despite recent bipartisan support for crypto, it is essential to remember that administrative policies can change quickly. As circumstances change over time, the concentration of large amounts of BTC on a country’s balance sheet could represent a liquidation risk.”
The German government was an example of this in 2024 when it unloaded 50,000 BTC, which kept prices suppressed below the $60,000 level, Rafique said.
The Bitcoin strategic reserve continues to be top-of-mind for many Bitcoin advocates, who say that establishing such a nation-state-level BTC treasury is the next step to making Bitcoin the global reserve currency and the standard monetary unit of account.
Related: US lawmakers tap Saylor, Lee to advance Bitcoin reserve bill
Risks to the US dollar and other financial markets
Establishing a Bitcoin strategic reserve could create a contagion that wouldn’t just be limited to crypto markets and would have widespread macroeconomic effects, Rafique told Cointelegraph.
“The most significant macroeconomic implication would be a loss of confidence in the dollar,” he said.
Building a Bitcoin reserve signals that the US dollar, which underpins the global economy, is weak and cannot sustain its value on economic strength alone, he added.
This could send shockwaves through the entire financial system as investors flee the US dollar for safe-haven assets such as gold or the Swiss franc, Rafique said.
Investors would also dump risk-on assets, creating a cascade of liquidations across financial markets that would likely culminate in a significant crash, as markets respond to the seismic shift in global finance, he concluded.
Magazine: US risks being ‘front run’ on Bitcoin reserve by other nations: Samson Mow