Original author: TechFlow
Good news, Trump signed the Strategic Bitcoin Reserve plan.
The bad news is, it’s not what you might think: “just spend money to buy more BTC.”
On March 7, President Trump officially signed an executive order announcing that the United States will establish a Strategic Bitcoin Reserve.
But considering the policy details, things do not seem as optimistic as expected.
According to the policy, the funds for this Bitcoin reserve do not come from direct purchases, but from Bitcoin obtained from criminal or civil asset forfeiture.
In other words, the US government will not use fiscal funds or additional taxes to purchase Bitcoin, but will rely on related assets confiscated in judicial proceedings.
This clause obviously disappointed the market because it meant that the size and speed of the reserves might be extremely limited, or even unable to have a direct boost to the Bitcoin market.
After the policy was announced, the price of Bitcoin also fell to a certain extent. Some netizens even joked that everyone was led by the policy, forming a Sichuan market.
But beyond the general consensus that it is below expectations, don’t ignore another key word in the policy - budget neutrality.
This provision stipulates that the U.S. government must ensure that it does not increase the burden on taxpayers when building up its Bitcoin reserves; but the Secretaries of the Treasury and Commerce are authorized to develop budget-neutral strategies to acquire more Bitcoin.
This may seem like a restriction, but in fact it opens up more possibilities for policy implementation.
Perhaps the real focus of this policy is not on the asset confiscation or reserve size that everyone is concerned about, but on the more implementation space of the budget neutrality strategy:
It’s not that you can’t increase your BTC holdings, but you need to be more flexible in doing so.
Budget neutrality, operational flexibility
What does budget neutral mean?
Simply put, budget neutrality is a fiscal policy principle that requires the government to implement new policies without increasing the overall fiscal deficit or the burden on taxpayers. In other words, if the government wants to spend money, it must offset this expenditure by cutting other expenditures or increasing revenue.
In this Bitcoin reserve policy, budget neutrality means that the US government cannot directly use the fiscal budget to purchase Bitcoin, but must use a certain buy and sell method to ensure that the source and expenditure of reserve funds offset each other.
This is also why the policy states that the initial funding source for the Bitcoin reserve will rely on Bitcoin obtained from criminal or civil asset forfeiture.
But it should be noted that budget neutrality does not mean that the government cannot increase its holdings of Bitcoin in other ways. To put it bluntly, this is not a question of cannot buy, but a question of how to buy.
Budget neutrality designs a closed loop logic for policy implementation: any additional Bitcoin reserves must be realized through the reallocation of other assets or resources. This mechanism opens up multiple possibilities for policy implementation:
Achieve reserve targets through asset replacement, such as gold
For example, the government can sell existing reserve assets (such as gold, treasury bonds, etc.) and use the proceeds to purchase Bitcoin. In this way, although the Bitcoin reserves have increased, the overall asset size has not expanded, thus meeting the requirements of budget neutrality.
Bitcoins seized through judicial means are directly included in the reserves
The government can use bitcoins confiscated through judicial procedures as a source of reserves. This method avoids fiscal expenditure, but the size of the reserve depends entirely on the amount of judicial confiscation, which is highly uncertain.
Through resource monetization or profit redistribution
The government can also use the proceeds from the monetization of other resources (such as energy, land, etc.) for Bitcoin reserves. For example, it can use idle energy resources to participate in Bitcoin mining, or sell certain non-core assets in exchange for Bitcoin.
This one buy, one sell logic is both a constraint on fiscal discipline and a blank for policy implementation flexibility. It ensures that the government will not increase its fiscal deficit due to increasing its holdings of Bitcoin, and also designs multiple paths for the specific operation of the policy.
Is the impact of not buying BTC directly underestimated?
You may ask, since the US government wants to build a strategic reserve so much, why doesn’t it just increase the budget to buy BTC? Why make it so complicated?
First, it may be to avoid market panic.
If the government directly uses the fiscal budget to purchase Bitcoin on a large scale, it may cause market concerns about the credit of the US dollar and even cause inflationary pressure. Budget neutrality avoids the risk of additional fiscal expenditure through the one buy and one sell approach, and can promote policies more smoothly.
Second, explore the possibility of asset restructuring
Budget neutrality provides the government with an opportunity to reallocate existing assets. For example, by selling gold reserves in exchange for Bitcoin, or exchanging other resource reserves for Bitcoin, it can make adjustments more flexibly based on market prices and international situations to achieve the goal of optimizing asset structure, and it can also be more agile in the competition for international relations and assets.
The key point here is that budget neutrality does not rule out the governments active increase in Bitcoin holdings, but rather requires a certain old for new or small for big approach to achieving reserve targets.
The current disappointment in the market is likely due to the fact that the flexibility hidden behind budget neutrality has been overlooked. In fact, this clause not only does not restrict the implementation of policies, but opens up more possibilities for it.
Given the possibility that the King of Understanding does not play by the rules, this also gives him more room to the right of interpretation belongs to me.
But at present, the market reaction seems to be not interested in this policy enough, and the prices of gold and Bitcoin both fell after the policy came out.
Peter Chung, head of research at Presto Research, posted that “BTC has not shown a positive reaction, indicating that there is a certain amount of ‘Buy the Rumor, Sell the News’ type of activity in the market.”
This short-term fluctuation may reflect the markets misunderstanding of policy logic.
The market originally expected the US government to directly use the fiscal budget to purchase Bitcoin, which would not only quickly expand the reserve scale, but also bring obvious purchasing pressure, pushing up the price of Bitcoin. However, the policy chose the budget neutral approach, and this operation logic was interpreted as insufficient strength in the short term, thus triggering selling sentiment.
In fact, budget neutrality does not mean a weakening of policy strength, but provides greater flexibility for policy implementation. As shown in the policy terms, the Secretary of the Treasury and the Secretary of Commerce are authorized to formulate a variety of strategies to acquire Bitcoin reserves. This old for new or small for big approach may release greater potential in the future.
In the short term, the market is more concerned about the scale and speed of Bitcoin reserves, so it is reasonable that the current price performance is not as good as expected.
But long-term changes in the macro-environment cannot be ignored.
If the US government gradually increases its holdings of Bitcoin in a budget-neutral way, it will send a signal to the market that Bitcoin is transforming from a speculative asset to a reserve asset. This signal may trigger other countries to follow suit, thereby accelerating the globalization of Bitcoin.
In particular, if the US government really sells gold in exchange for Bitcoin, this asset replacement will further consolidate Bitcoins status as digital gold and lay the foundation for its role in global reserve assets.
As a weather vane, the US governments actions may also trigger a chain reaction on an international scale. Other countries may follow this model and promote the diversification of global reserve assets.
When everyone thinks that Bitcoin should become a type of asset reserve, how it is stored does not seem to be the point.
It has not been easy for the crypto industry to grow from a small-scale geek experiment to where it is today; moving toward the mainstream amid controversy is something that every BTC holder should be happy about.
