Introduced by Senator Cynthia Lummis in 2024, the legislation would direct the U.S. Treasury to acquire up to 1 million Bitcoin over five years. This bold move, endorsed by President-elect Donald Trump, is seen as a potential game-changer for the cryptocurrency landscape.

A Transformative Initiative

According to CoinShares, a digital asset research firm, the impact of the Bitcoin Act on Bitcoin’s adoption could be as widespread as anything seen to date, even when the monumental success of ETFs hit the market in 2024. In a blog post published recently, CoinShares underscored that the Act could give Bitcoin a status lift as an asset class, with the endorsement of the world’s largest government.

Source: CoinShares via X

“Passing the Bitcoin Act would reduce the stigma that institutional investors deal with and would greatly increase Bitcoin’s credibility,” the post said.

The proposed legislation also goes in the direction of the trend of countries that consider Bitcoin a strategic reserve asset. Countries like El Salvador, Brazil, and Russia have already taken steps to include Bitcoin in their financial systems, citing its potential as a hedge against economic uncertainties.

Potential Market Ripple Effects

Crypto analysts project that the adoption of a strategic Bitcoin reserve in the U.S. could lead to a cascade of demand shocks, potentially driving Bitcoin’s price to unprecedented heights. Adam Back, CEO of Blockstream, suggested that Bitcoin could surpass $1 million per coin if the Act is implemented, especially if other governments follow suit.

Bitcoin (BTC) price chart. Source:Bitcoin Liquid Index (BLX) via Brave New Coin

“Such a move would set off a global wave of nation-state Bitcoin purchases, fundamentally transforming the financial landscape,” Back noted.

The Act also complements the growing institutional interest in Bitcoin, as evidenced by the surge in ETF inflows. Bloomberg Intelligence reported that Bitcoin ETFs surpassed $100 billion in net assets by the end of 2024, with further inflows of $48 billion anticipated in 2025.

Challenges and Alternative Pathways

Despite its potential, the Bitcoin Act faces significant political hurdles. Passing the legislation through Congress would require substantial bipartisan support, which remains uncertain. However, a leaked draft of an executive order offers a more immediate alternative.

The proposed executive order would have the U.S. Treasury incorporate Bitcoin into the ESF, and then immediately appropriate $21 billion to purchase more Bitcoin. Unlike the Act, an executive order could be issued at any time at the discretion of the President without a vote by Congress.

While less impactful than the Bitcoin Act, this would still signal a monumental shift in establishing Bitcoin as a global reserve asset.

A Global Shift Toward Bitcoin Reserves

The U.S. is not alone in its exploration of Bitcoin as a strategic asset. European MP Sarah Knafo has called for the European Union to consider a Bitcoin reserve, while lawmakers in Brazil and Russia have proposed similar initiatives.

Source: CoinShares

As CoinShares highlighted, transitioning to a diversified reserve that includes Bitcoin could address global economic challenges, such as declining confidence in the U.S. dollar. The dollar’s share of global reserves has dropped from 71% in 2000 to 59% in 2022, according to the International Monetary Fund (IMF).

The Bigger Picture

If passed, the Bitcoin Act would reposition Bitcoin within the global economy and would have wider ramifications in terms of institutional and government adoption. The influence would not be felt within the United States alone but would rather create a paradigm shift in how nations perceive and approach digital assets.

The immutable nature combined with unparalleled scarcity makes Bitcoin a perfect addition in any strategic reserve, Coinshares concluded. That means Bitcoin is a good investment for retail investors as well.