Bitcoin's Price Remains Stalwart as U.S. Crypto Reserve Announced: Will the Flywheel Effect Trigger a Shift?

White House plans for a U.S. strategic bitcoin reserve fired up optimism among the world's crypto enthusiasts. But until this past week, the currency itself barely flickered as recent trade war and tariff news whipsawed markets. Industry experts project a vast, eventual impact on the bitcoin price and the cryptocurrency industry. This week's action is lending credence to those expectations.

Kindly view the video at Investors.com titled "Crypto Strategic Reserve Discussion: Trump's Comments Bolster Bitcoin Amid These Challenges"

Bitcoin values surged approximately 25% after hitting a trough on April 9, recovering over half of their drop since the record high above $105,000 in January. According to analysts, establishing a strategic reserve might discreetly trigger a competition to accumulate bitcoins.

On March 6, President Donald Trump issued an executive order aimed at establishing a Bitcoin strategic reserve along with another collection of various digital assets such as altcoins. These reserves will primarily consist of properties confiscated by agencies including the Treasury Department. They've been directed to explore methods for obtaining these holdings without affecting their budget balance; however, they're only permitted to keep these resources rather than selling them—acting akin to a digital version of Fort Knox.

A proposed federal digital currency reserve indicates a fresh group of investors joining the crypto market. In today’s financial landscape, where Virginia serves as a key location, Strategy has amassed more Bitcoin than all the biggest government-held reserves put together, encompassing even those of the United States. In terms of individual corporations, Block.one possesses the most significant stockpile of Bitcoin.

Other significant purchasers encompass the Bitcoin ETFs, which have experienced remarkable success following their regulatory clearance and introduction in January 2024. Leading this group is the iShares Bitcoin Trust, boasting a more substantial hoard of bitcoins compared to what Strategy has reported.

On the day of the announcement at the White House, Bitcoin prices along with related stocks and ETFs experienced only minor effects.

What Is the Cost of Bitcoin?

Immediately following the announcement of the executive order, Bitcoin dropped below $85,000, down from approximately $90,600 prior to the order, according to CoinMarketCap data. Throughout most of April, Bitcoin fluctuated within a range of $77,000 to $87,000, but in the last week, it surged above $95,000.

MicroStrategy, which goes by its formal name now, hit the lowest point during a three-month decline when the strategic reserves were declared. Since late February, the stock price has surged almost 40%. In addition, MicroStrategy keeps adding more bitcoins to their holdings. On Monday, Chairman Michael Saylor disclosed that they had purchased an additional 15,355 bitcoins at approximately $1.42 billion, translating to around $92,737 each. By April 27th, MicroStrategy held onto 553,555 bitcoins bought for a total of $37.90 billion, averaging out to roughly $68,459 apiece.

iShares Bitcoin, which was also declining, saw a 3% increase during the same week as the news. The ETF subsequently stabilized and remained relatively unchanged for several weeks prior to a significant recovery in April.

Bitcoin miners — for instance Hive Digital Technologies and TeraWulf — experienced only a minimal effect on their stock prices. Most mining companies have retreated to trade under $5.

Why Should the US Establish a Bitcoin Strategic Reserve?

Individuals who expected a quick surge in prices, whether in cryptocurrencies or crypto-related stocks, did not have their expectations aligned with reality, as stated by Bobby Zagotta, the president of Bitstamp’s U.S. division.

"In my view, the purpose of this initiative is to enable the U.S. government—and particularly the Treasury—to broaden and diversify their asset base through innovative means," he explained.

If that boosts the price of Bitcoin over time, terrific," Zagotta stated. "However, it should not be misinterpreted as the driving force.

Few are likely to buy the pitch that the bitcoin industry is fundamentally concerned with the health of the U.S. debt portfolio. Ultimately, short term and long, it is all about the bitcoin price.

In this regard, Zagotta recognizes that establishing a U.S. reserve could boost participation from various institutions and investors. This increased interest would consequently drive up prices.

Greg Benhaim, who serves as the vice president of product at digital asset manager 3iQ, described this development as a "net positive for both Bitcoin and the broader sector." He highlighted how the directive differentiates Bitcoin from other types of cryptocurrencies due to its standing as a reliable store of value.

"As most cryptocurrency investments resemble those in early-stage technology ventures, Bitcoin stands out as being deeply established—more so than digital gold or a means of storing value with programmable monetary policies—and has undergone extensive testing over time," according to Benhaim.

Government Ownership of Bitcoin: Who Controls It?

In 2021, the U.S. became the leading nation to declare an official bitcoin reserve. Meanwhile, El Salvador, which has an economy roughly one-third the size of Puerto Rico’s, adopted bitcoin as recognized money. The country mandated that enterprises must accept this digital currency. Their early investment totaling around $21 million performed favorably, seeing a substantial increase of 89% in value between when it was accepted as legitimate tender and December 2024.

However, high implementation expenses and various other elements rendered the endeavor too costly. As part of an agreement reached in December for a $1.4 billion loan from the International Monetary Fund, El Salvador demoted Bitcoin from its official currency status and ceased mandating that businesses accept it.

A number of smaller countries — including the United Arab Emirates, Switzerland, Singapore, Nigeria, Ethiopia, Kenya, Argentina and some EU member states — are ramping up adoption or regulatory efforts, but do not manage official government bitcoin reserves.

In an April 17 interview with the Financial Times, Binance Chief Executive Officer Richard Teng disclosed that multiple governments and sovereign wealth funds have shown interest in the exchange. aiming to set up their own reserves Teng refused to reveal the specific countries involved; however, Binance has openly collaborated with Pakistan and Kyrgyzstan to establish regulatory structures for cryptocurrencies.

Multiple countries have sizable bitcoin holdings, but they are not official strategic reserves. The U.S. is the top government holder with around 198,000 bitcoin as of mid-April, according to Bitcoin Treasuries data. China ranks second with around 190,000 bitcoin, followed by the U.K. with 61,245 and Ukraine with over 46,000.

Bitcoin Buying Options

Even though the Trump administration has not proposed purchasing Bitcoin officially, Benhaim suggests there are methods to obtain the cryptocurrency without affecting the taxpayers' expenses. Being "budget neutral" implies these acquisitions would not raise public spending.

Two potential options are selling gold to buy bitcoin, or using tariff revenues.

Regardless of the path chosen, Benhaim anticipates that the administration will release retroactive statements. This could minimize the chance for investors to speculate and thus prevent price increases.

By pre-announcing these purchases, it would be akin to Warren Buffett stating he plans to acquire substantial amounts of Apple stock within the coming year. Consequently, everyone might purchase shares with the intention of selling them back to him at a higher price, as per Benhaim’s perspective.

Individually, Senator Cynthia Lummis (R-Wyo.) and Representative Nick Begich (R-Alaska) introduced the Bitcoin Act of 2025 on March 11. This legislation suggests purchasing one million bitcoins within five years to strengthen the strategic reserves. Although the bill hasn’t been approved by the Senate yet, it outlines budget-neutral acquisition methods.

Benhaim questions whether it will succeed because of the fragmented state of Congress. Should it go through, this action would signal globally the timing of America’s acquisition process.

Refinancing U.S. Debt Using BitBonds

A few crypto industry players have proposed ways to implement President Trump's executive order and utilize bitcoin to refinance national debt.

In late March, the Bitcoin Policy Institute suggested that the U.S. introduce bitcoin-boosted U.S. Treasury bonds called "BitBonds." The design for these BitBonds includes allocating 90% of the funds raised to traditional financing activities, with the remaining 10% designated for purchasing bitcoins.

Given a total value of $2 trillion in BitBonds, the Bitcoin Policy Institute predicts that this proposal has the potential to yield approximately $700 billion per year in interest savings over a decade.

Matthew Sigel, who leads digital asset research at VanEck, presented a comparable BitBond proposal during the Strategic Bitcoin Reserve Summit on April 15.

VanEck suggested an approach where 90% of the investment would be allocated to government bonds and 10% to Bitcoin over a period of ten years. According to their proposal, investors could earn up to a 4.5% yearly return from Bitcoin profits. Should these profits surpass this percentage, both the government and the bond purchaser would equally divide the additional amount gained at a rate of fifty-fifty.

The Flywheel Effect and the Bitcoin Pricing

In an interview with IBD, Sigel pointed out that El Salvador is the sole nation purchasing Bitcoin in the open market. Currently, El Salvador’s Bitcoin reserves account for slightly more than 3% of its yearly gross domestic product.

However, eight countries such as El Salvador, Ethiopia, and Kenya utilize governmental assets, mainly power generation, to mine Bitcoin. Despite geographical market constraints limiting both the sales and pricing of generated electricity, these nations can employ this energy to mine Bitcoin and subsequently convert the cryptocurrency into fiat currency.

"So that model is very attractive for poor countries that are energy rich, who have a lot of debt," Sigel said.

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He mentioned a "few" suggestions for countries such as Japan, Germany, and Sweden to purchase Bitcoin on the open market. However, these initiatives haven’t gained widespread support from both sides of the political aisle and seem improbable in the short run.

However, if other nations join in and begin declaring their acquisition of bitcoins, it might ignite a global competition within the sector.

“I believe this will have a significant influence,” Benhaim stated. “Should the U.S., China, or Russia officially declare that they possess a specific amount of Bitcoin and intend to keep acquiring it, considering it crucial for their national reserves, it would trigger a flywheel effect where everybody rushes to amass additional bitcoins.” This flywheel effect, introduced by writer Jim Collins, illustrates how consistent minor achievements can lead to rapid expansion for companies over time.

Regarding Bitcoin, the growth is expected to begin slowly but will "pick up speed significantly" as soon as major nations become involved, according to Benhaim’s predictions.

States Progress Towards Cryptocurrency Reserves

Even with the Trump executive order, Benhaim anticipates that states will likely accelerate their progress towards establishing comprehensive Bitcoin reserves and engaging in open-market transactions.

In March, the Texas Senate approved a measure to create both a Bitcoin and cryptocurrency reserve along with forming an advisory panel. As of early April, similar proposals for crypto reserves were progressing in states like Arizona, New Hampshire, and Florida. Additionally, North Carolina has begun drafting laws that could permit the state treasurer to allocate up to 5 percent of the state’s pension fund towards cryptocurrencies.

In March, Utah enacted legislation permitting residents to engage in Bitcoin mining; however, they removed a clause intended to create a Bitcoin reserve during the final review. Meanwhile, Oklahoma, Montana, North Dakota, South Dakota, and Wyoming have recently rejected proposals for reserves.

As of late April, over 20 states had either proposed or were contemplating laws concerning Bitcoin reserves or digital asset investments, as reported.

Sigel believes it makes more sense for states to have reserves because they don't print money and can't manufacture their own fiat currencies.

"And these state gambits in the aggregate could account for billions of dollars of bitcoin buying," he added.

How U.S. Strategic Reserve Will Affect Bitcoin Supply

Still, combined national government holdings total less than 2.5% of the entire 21-million-unit supply of bitcoin. Public companies hold about 3.35% of the total supply, while private firms hold 1.37%, according to Bitcoin Treasuries data.

ETFs and other funds own approximately 6.17% of the total supply.

For now, any U.S. federal bitcoin reserve would represent only a tiny fraction of the total supply. In contrast to the Strategic Petroleum Reserve, which can influence oil prices, a bitcoin reserve wouldn’t be substantial enough to set a price floor, according to Sigel.

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However, it might assist in moderating the risk of offloading the coins in a chaotic manner that would cause prices to plummet, he noted additionally. "Yet, without a clear route toward amassing them, I expect that Bitcoin will stay rather erratic," he speculated.

Benhaim believes there is a significant advantage for the government keeping its bitcoins as it would inject a substantial level of liquidity into the market. This could encourage large conventional companies to enter this sector, foster better-developed trading platforms, and enhance clarity within the field.

"As the asset category expands, it attracts increasingly intelligent individuals to participate, fostering significant growth and advancement," he explained.

Current Bitcoin Mining Activity

Sigel points out that with present mining rates, miners produce roughly 164,000 bitcoins each year. This equates to approximately $15.5 billion worth of new currency being added annually based on today’s prices.

“Since their launch, ETFs have surpassed that figure, despite the absence of government purchases,” he stated. He also noted that currently over 100 firms include Bitcoin on their balance sheets, which is twice as many as last year.

I personally believe that it may not be essential for governments to purchase in the open market," he stated. "However, considering an annual issuance of just $13 billion, every contribution counts.

Bitcoin Price Forecast

On April 28th, Bitcoin reached nearly $95,600, marking its peak since mid-February. By Monday, the digital currency had only increased by under 1% year-to-date in 2025. However, compared to November 4th—shortly following the U.S. presidential elections—it has risen over 39%.

The top five Bitcoin ETFs based on asset size are the iShares Bitcoin fund, Fidelity Wise Origin fund, Grayscale Bitcoin trust, ARK 21Shares Bitcoin fund, and the smaller version of the Grayscale Bitcoin trust. These funds have remained relatively stable in value throughout the year.

Zagotta from Bitstamp remains hopeful about the latter part of the year. He anticipates further U.S. regulatory clarification, though not necessarily "total" clarity.

He stated that it could potentially be a stablecoin legislation or a guideline towards a regulatory structure that’s under consideration, which would indeed be beneficial.

In the meantime, ETF provider ProShares Trust intends to introduce three XRP ETFs on April 30. XRP serves as the currency utilized within Ripple’s payment system. These three leveraged funds aim to mirror the value of XRP tokens via futures contracts without granting direct ownership rights. They consist of the Ultra XRP ETF, Short XRP ETF, and Ultra Short XRP ETF. According to reports from Barron's, the SEC has not raised any concerns regarding these ETFs, thus permitting ProShares to move forward with their introduction.

Benhaim acknowledges that predicting an exact price point for Bitcoin is challenging under present market conditions. Instead of concentrating on immediate fluctuations, his attention is directed towards the broader future perspective. However, he suggests that if the burgeoning crypto network maintains its performance trajectory and gains more acceptance, this could drive prices upward over time.

Sigel notes that numerous risky assets such as equities, commodities, and junk bonds have exhibited volatility and strong correlation due to present macroeconomic uncertainties. This includes bitcoin as well.

"Just alleviating that (uncertainty) could be sufficient for Bitcoin to regain its tendency to outperform," he stated. Even though it’s known for volatility, he noted, Bitcoin generally surpasses the Nasdaq when measured over any timeframe.

Certainly, investors might identify particular instances where the Nasdaq surpassed Bitcoin; take, for instance, the year 2022. However, over the last five years, with the exception of one, Bitcoin has left the Nasdaq behind, often at a significantly higher rate.

You can keep up with Harrison Miller for additional stock news and insights on X/Twitter. @IBD_Harrison