BTC strategic reserve asset: analysis of economic principles

Author: James Butterfill Source: CoinShares Translation: Shaw Jinse Caijing

Against the backdrop of economic uncertainty, rising national debt, increasing inflationary pressures, and escalating geopolitical tensions, governments around the world are reexamining the composition of their strategic reserve assets. Historically, gold, foreign exchange, and commodities such as oil have been stable economic and crisis hedging tools. Bitcoin, a decentralized, limited-supply digital asset launched in 2009, is now receiving increasing attention. The United States established a strategic Bitcoin reserve in March 2025, marking a crucial turning point and sparking global discussions on the role of Bitcoin in national reserves. We will explore the economic principles of Bitcoin as a strategic reserve asset, weigh its pros and cons, and draw insights from recent developments, academic research, and global trends.

Central banks of various countries hold strategic reserve assets to ensure economic stability, manage international balance of payments, and enhance resilience during crises. As of the first quarter of 2024, the value of gold in global central bank reserves reached $22 trillion, with total foreign exchange reserves amounting to $12.3 trillion, serving as the cornerstone of this system. These assets can hedge against inflation, diversify risks, and reflect economic credibility. Bitcoin, with its fixed supply of 21 million coins and censorship-resistant blockchain technology, is gradually becoming a complement to traditional assets. Driven by the unique properties of Bitcoin and the evolution of the global financial landscape, countries such as El Salvador, Brazil, and now the United States are leading this transformation.

We also see that some states in the United States, such as New Hampshire, have passed HB 302, establishing the first Bitcoin and digital asset reserve in the United States. Arizona has also proposed a similar bill, which has recently been approved by the governor, indicating an increasing interest in Bitcoin among state officials. Texas recently passed Senate Bill 21, formally establishing the Bitcoin Strategic Reserve Fund, which is independent of the state's finances.

Data source: bitcoinreservemonitor.com

Why is the traditionally cautious government starting to compare Bitcoin with traditional assets such as gold and foreign currencies? The answer lies in structural dynamics rather than speculative enthusiasm.

What Makes Bitcoin Different

Unmanipulable scarcity: Bitcoin's supply limit is 21 million. Unlike fiat currency or even gold, this fixed limit is not influenced by political decisions. During periods of continuous expansion of balance sheets, it provides predictability. Since its inception in 2009, the annualized inflation rate of Bitcoin has dropped from 50% to around 0.83% after halving in 2024, while the average annual inflation rate of global legal tender is 2%-5% (even higher in economies with severe inflation such as Venezuela). From 2009 to the present, the price of Bitcoin has risen by an average of 165% per year, outperforming traditional assets such as gold during the same period (with an annual return rate of 7.6%).

Reliable Inflation Hedge Tool: Between 2020 and 2024, the US inflation rate increased by about 20%. During the same period, the value of Bitcoin grew by over 1000%. This is not just a correlation; it reflects an increasing demand for assets that can hedge against currency devaluation.

True portfolio diversification: The low correlation of Bitcoin with traditional assets makes it an effective diversification tool. Even with high volatility, a modest allocation of 4% can enhance the overall Sharpe ratio of a reserve portfolio. Central banks around the world have started to emulate these advantages.

Resilience Against Sanctions: Bitcoin will not be seized or frozen. In a world where global financial infrastructure is sometimes restricted for political reasons, Bitcoin provides sovereign flexibility. It helps protect countries facing geopolitical restrictions.

Strategic Advantage: Bitcoin is a globally recognized, borderless asset that can be transferred instantly without relying on banks or intermediaries such as SWIFT. This is crucial for the reserves of countries with unstable international trade, remittances, or financial systems.

Signal of Technological Credibility: Owning Bitcoin indicates that a country is participating in financial innovation. This reflects both its awareness and its willingness. It is not just a currency hedge, but also a demonstration of leadership in the evolving financial landscape.

Innovative Signals: Using Bitcoin to position a country as a leader in the digital economy, attracting investment and promoting innovation. The US Bitcoin strategic reserve reflects its forward-thinking policy. This is consistent with El Salvador's adoption of Bitcoin in 2021, enhancing its global tech image. In a world of positive digital financial transformation, the technological evolution of Bitcoin and currency is in line, unlike static traditional reserve assets.

Crisis Resistance: Bitcoin's decentralized nature shields it from the impact of traditional financial system collapses, such as bank defaults, sovereign debt crises, or currency collapses. Its cryptographic security ensures value storage without the need for trust. Silicon Valley Bank collapsed (March 2023), Bitcoin surged from $20,000 to $28,000 within two weeks, an increase of 40%, while U.S. bank stocks fell by 25% during the same period. Many of our customers expressed the need for an asset unrelated to the financial system.

During the 2022 Russia-Ukraine conflict, Bitcoin was used to circumvent financial sanctions and capital controls. Ukrainian non-governmental organizations and individuals received over $100 million in Bitcoin donations, demonstrating its utility in crisis situations where traditional financial systems are restricted. In a world of rising sovereign debt (with US debt at 115% of GDP), Bitcoin provides a non-sovereign alternative that is not affected by default risk or quantitative easing policies.

Technical Resilience: Since 2009, the normal operation time of the Bitcoin network has reached 99.98%, and the core protocol has never encountered a successful hacker attack. Its hash rate (computing power to secure the network) reached about 900 EH/s in 2025, making it the most secure blockchain by computing power standards.

The resilience of Bitcoin to network attacks and its global node distribution make it a robust long-term store of value compared to centralized systems vulnerable to single points of failure. The growth of its hash rate reflects continuously improving security, rising from 1 EH/s in 2016 to 900 EH/s in 2025.

Understand the Risks

Volatility: Bitcoin still exhibits volatility. This is because it is a relatively young asset compared to other asset classes. Although its volatility makes reserve management more complex, its volatility has recently dropped to below the level of gold for the first time. As Bitcoin as an asset gradually matures and its fundamentals are better understood, its volatility is likely to further decrease.

Settlement Application Restricted: Although Bitcoin is widely recognized, it has not been widely used for trade settlement. This restricts the direct application of Bitcoin unless it is supported by a more extensive infrastructure (such as stablecoins or payment platforms).

Regulatory Uncertainty: Not all jurisdictions have clearly defined their position on Bitcoin. This can bring complexity to reserve managers, especially in international arrangements.

Lack of Flexibility During Crisis: The fixed supply of Bitcoin means it cannot increase supply in emergencies. This limitation is part of its appeal, but it also means it cannot be used as a countercyclical tool like fiat currencies.

Comparison of Bitcoin and Traditional Reserves

Central banks of various countries should hold Bitcoin

For countries seeking economic resilience in the digital age, Bitcoin provides a forward-looking option. It can hedge against inflation, diversify investment portfolios, and mitigate geopolitical risks, making it a strong complement to gold and foreign exchange reserves. With $35 trillion in national debt and bipartisan support, the United States will include Bitcoin in its reserve system by 2025, indicating increasing acceptance. However, economists remain skeptical of its speculative nature.

The global financial system is under pressure, with increasing debt, persistent inflation, and geopolitical rifts all requiring new tools. The U.S. reserve adjustments in 2025, Brazil's RESBit proposal, and Russia's exploration all reflect a game theory competition around ensuring the limited supply of Bitcoin. Central banks around the world already hold $22 trillion in gold and $12.3 trillion in foreign exchange, but these assets have limitations: physical constraints on gold and foreign exchange subject to centralized policies. Bitcoin's $2 trillion market cap and growing institutional adoption make it a viable supplement.