Donald Trump, $80k Bitcoin and the Strategic Bitcoin Reserve

As Donald Trump re-enters the Oval Office and hints at the establishment of a Strategic Bitcoin Reserve, signaling that the U.S. government will become a direct participant in the cryptocurrency markets, the financial world finds itself in uncharted territory. With Bitcoin spiking to $80,000 on the heels of these events, analysts and investors alike are examining the potential ripple effects, both immediate and long-term, on global finance, sovereign currencies, and the traditional commodity-based monetary system.

A Strategic Bitcoin Reserve

The concept of a “Strategic Bitcoin Reserve” introduces a major shift in how governments interact with digital assets. Traditionally, strategic reserves have been limited to commodities like oil or precious metals, assets that are finite and considered to have inherent value. This move effectively elevates Bitcoin, a digital currency, to the status of an asset worthy of national reserves—a radical acknowledgment of its potential to act as a financial safeguard. Historically, Bitcoin has been viewed as a speculative asset rather than a true store of value ( event though many of us have disagreed with that for years ).

Initial Market Reaction: Bitcoin almost at $80,000

After the Trump win, Bitcoin’s price reacted with a dramatic surge close to $80,000. This price spike reflects the market’s initial enthusiasm and speculation surrounding this move. Investors, anticipating a major influx of government-backed demand, have aggressively entered the market, betting that this shift will usher in a new wave of adoption.

The immediate rally could be attributed to three main factors:

Government Endorsement and Legitimization:

For years, the lack of official endorsement has been a major hurdle for institutional investors. Trump’s support and the establishment of a national Bitcoin reserve remove a significant amount of perceived risk for investors.

Anticipated Supply Shock:

With the U.S. government entering as a buyer, there’s an expectation of increased demand in an already limited supply market, potentially creating a significant supply-demand imbalance.

Global Imitation Potential:

Investors are speculating that other nations may follow suit, which could amplify the demand for Bitcoin and push its value even higher.

Long-Term Implications

What made me write this piece is that I believe the election of Trump to be a pivotal moment for this decade, not just for global politics but for the global financial system as well. We may well look back on November 2024 as a historical moment that impacted so many wider issues for the rest of the decade.

However, the impact on Bitcoin itself will bring massive second-order effects in its own right, as a reaffirmation of Bitcoin as a future fixture in global finance—and not just a passing fad—changes the fundamental architecture of power, politics, and economics. As more governments adopt Bitcoin, the digital asset will likely gain the credibility and stability that comes with being held by sovereign states, reshaping not only monetary systems but also the way nations view sovereignty, borders, and control over capital flows.

With Bitcoin cementing its role as a foundational asset, it could lead to profound shifts in geopolitical alliances, with countries uniting or diverging based on their stance toward digital assets. We could see entire blocs of pro-Bitcoin nations emerge, fostering tighter alliances grounded in financial independence from traditional fiat powers.

This division could manifest in economic policies, trade agreements, and perhaps even in digital borders—restrictions on the movement of digital assets between nations could become new battlegrounds, impacting everything from trade routes to cyber sovereignty. This monetary shift may also stoke conflicts, as countries with lagging Bitcoin adoption or strict digital currency controls find themselves at an economic disadvantage, their currencies less desirable and their influence waning. Traditional financial powers will likely resist this shift, potentially using legal and regulatory frameworks—or even economic sanctions and diplomatic pressure—to slow or control Bitcoin adoption globally.

The competition for Bitcoin mining resources, which are energy-intensive, could similarly drive geopolitical conflicts as nations vie for access to affordable and sustainable energy sources. The implications for wealth distribution and societal power structures are also monumental. With Bitcoin as a primary reserve, individuals and organizations that hold Bitcoin may find themselves holding more influence than ever before, potentially rivaling the economic power of small states. This could decentralize financial influence, allowing new centers of power to emerge outside traditional political and financial capitals.

All due to the election of Trump in 2024, who created a Bitcoin Strategic Reserve……

Key Medium-Term Considerations:

1. Bitcoin as a Global Reserve Asset

   If other countries follow the U.S. lead, Bitcoin could gradually emerge as a global reserve asset. Currently, the U.S. dollar dominates global reserves, but Bitcoin’s appeal as a decentralized and inflation-resistant asset might make it an attractive alternative, particularly for nations looking to reduce their dependence on the dollar. In this scenario, Bitcoin would likely experience a period of rapid appreciation, with the value reaching unprecedented highs as governments around the world begin purchasing it. This would create a new form of global monetary standard that diverges from the traditional fiat system, presenting a challenge to central banks that have historically controlled monetary policy through fiat currency issuance.

   
   

2. Increased Regulation and Institutional Adoption

   With the U.S. government actively investing in Bitcoin, it is likely that regulatory frameworks will be refined to support this shift. Enhanced regulation could encourage institutional investors, such as pension funds and endowments, to allocate portions of their portfolios to Bitcoin, driving significant demand. While increased regulation could create short-term price instability as markets adjust, it would ultimately lend greater legitimacy to the asset, potentially stabilizing its value. Institutions tend to seek stability and predictability, so Bitcoin’s adoption as a legitimate, regulated asset class could reduce its historic price volatility.

   
   

3. Potential Global Competition and Currency Displacement

   Another possibility is that the U.S. adoption of Bitcoin will prompt other countries to develop competing digital currencies. Countries like China have already launched their own digital yuan, and this move by the U.S. could accelerate the development and adoption of state-backed digital currencies. Personally I don’t feel that this will displace Bitcoin, although it is a threat. Bitcoin has a huge first mover advantage, and is protected by the security of its hash rate. A “China coin” will simply be another alt coin, although backed by a nation as powerful as China, it could well rise up quickly and displace the current alt coins that we see today.

   Geo-political Considerations

   1. Erosion of the U.S. Dollar's Dominance

   The U.S. dollar has been the world’s primary reserve currency since the Bretton Woods Agreement in 1944, giving the United States unparalleled financial leverage and global influence. If Bitcoin begins to rival or replace the dollar as a preferred reserve asset, this could reduce the United States’ ability to control international economic policies through dollar-based sanctions, trade agreements, and international monetary organizations such as the International Monetary Fund (IMF) and the World Bank. While Trump is correct to want to keep the USA at the forefront of Bitcoin adoption ( and have a Strategic Reserve in place in case it skyrockets in value ), there is no doubt that Bitcoins success impacts the US dollar. However, this isn’t the own goal it seems, primarily because we still don’t know who created Bitcoin……

   
   

   2. Decentralized Power Structures and Autonomy for Smaller Nations

   Bitcoin’s decentralized nature could empower smaller, historically less influential countries, allowing them to participate in a financial ecosystem not controlled by any single nation or central bank. By holding Bitcoin, countries with weaker currencies or economies could hedge against the volatility of their own fiat currencies and avoid reliance on the dollar or euro.

   
   

   Opportunities for Financial Independence: Countries that have traditionally been impacted by inflation, such as Argentina, Turkey, and Venezuela, might benefit from holding Bitcoin in their reserves as a counterbalance to hyperinflation. This financial autonomy could enhance their negotiating power in international relations, allowing them to align with other Bitcoin-holding nations rather than depending on traditional currency reserves.

   
   

   Reduced Dependence on IMF Bailouts: Many developing nations often rely on IMF bailouts and the conditions that accompany them, which can restrict their fiscal autonomy. With Bitcoin in reserves, some of these countries could potentially reduce their dependence on the IMF, reshaping their relationship with global financial institutions and allowing for more self-directed economic policy.

   
   

   Now, a precedent has already been set here - the nation of El Salvador……

3. Strategic Competition and Alliances

   As nations begin to adopt Bitcoin in their reserves, the competition for Bitcoin will intensify.We might see nations actively mining Bitcoin or supporting Bitcoin-friendly policies to build strategic reserves, creating new alliances around Bitcoin-related economic policies and governance.

   
   

   Bitcoin as a Geopolitical Asset: Much like oil and natural gas, Bitcoin could become a strategic asset for nations to acquire and secure. Countries with abundant and low-cost energy sources, such as Russia, Canada, and some Nordic nations, could emerge as Bitcoin mining hubs, using Bitcoin holdings as a bargaining chip in international diplomacy.

   
   

   New Alliances and Blocs: We may see the formation of a new geopolitical bloc of Bitcoin-holding nations that collaborate on issues of digital asset regulation, energy for mining, and economic development strategies around cryptocurrency. This bloc might resemble the OPEC consortium for oil, with member nations leveraging their Bitcoin holdings for mutual economic benefits or to negotiate trade deals.

The price question

Right…. Here we go …..

With Bitcoin’s supply permanently capped at 21 million, its scarcity is fundamental to understanding its potential future value. This capped supply is further restricted by the reality that millions of bitcoins have likely been lost forever due to forgotten private keys, lost wallets, or other irretrievable circumstances. Estimates suggest that around 3-4 million bitcoins may be permanently inaccessible, reducing the effective supply closer to 17-18 million.

Given the context of U.S. government adoption and the potential for other nations to follow suit, Bitcoin may see an influx of institutional and sovereign investment at a scale never before witnessed in the cryptocurrency market. This demand pressure, when juxtaposed against the limited supply, provides a unique opportunity for valuation calculations.

Scenario 1: Plausible Case — Bitcoin Reaches Near Gold’s Market Capitalization

Gold has historically served as a primary store of value for nations, with an estimated market cap of around $12 trillion (I have seen it recently estimated as high as $18T, but we can use $12T for these calculations ). Given Bitcoin’s limited supply and increased adoption, it’s reasonable to hypothesize that Bitcoin could one day reach a market cap on par with gold. If governments begin to allocate a portion of their reserves to Bitcoin, we could see a significant portion of the world’s wealth diverted to this new “digital gold.”

Estimated Market Cap: $12 trillion

Bitcoin Supply: 18 million (effective supply accounting for lost coins)

12T / 18M = $667k per Bitcoin

Scenario 2: Ultra-Bullish Case — Global Reserve Asset Status

In this most optimistic case, Bitcoin’s role as a reserve asset transcends that of traditional commodities, reaching a near-parity level with the total holdings of fiat currency reserves globally. This could involve substantial reallocation of global wealth, with Bitcoin capturing a market cap approaching $30 trillion—a reflection of both sovereign wealth fund participation and institutional investment on a massive scale. If Bitcoin achieves this level of adoption, its valuation could see the following potential:

Estimated Market Cap: $30 trillion

Bitcoin Supply: 18 million (effective supply accounting for lost coins)

30T / 18M = $1,667k per Bitcoin

Conclusion

This is a historic moment.

Trump, love him or hate him, will have a lasting effect on where we go next.

The events of November 2024 will shape not just global politics for the remainder of the decade, but the global financial system as well (Barring the breakout of WW3 - which we all hope never happens ).

And Bitcoin’s establishment as a recognized global asset heralds a paradigm shift that will ripple through every layer of politics, war, borders, finance, and economics for the remainder of the decade…….