The Potential Impact of the Bitcoin Act on Institutional Investors
A recent blog post by cryptocurrency researcher CoinShares suggests that establishing a strategic Bitcoin reserve in the United States would have a more profound long-term impact on Bitcoin’s adoption than the launch of exchange-traded funds (ETFs) in 2024. According to the post, the enactment of the Bitcoin Act in the United States would effectively grant Bitcoin the endorsement of the world’s largest government, significantly diminishing the stigma faced by institutional investors.
The Proposed Bitcoin Act: A Step Towards Mainstream Adoption
In January 2024, US lawmakers proposed the Bitcoin Act, which would direct the US Treasury Department to create a ‘strategic Bitcoin reserve’ by purchasing 1 million BTC over a 5-year period. President-elect Donald Trump endorsed the plan, which has not yet been passed into law. The proposal has gained traction since the November US elections, where members of Trump’s Republican political party gained control of the Senate.
Why Institutional Investors Remain Skeptical
CoinShares stated that ‘numerous interactions with institutional clients’ showed that Bitcoin’s credibility as an asset class remains a primary barrier to institutional BTC adoption. According to the post, passing the Bitcoin Act would diminish this stigma by granting Bitcoin the endorsement of the world’s largest government.
ETF Inflows: A Correlation to Bitcoin’s Performance
CoinShares noted that ETF inflows correlate closely to BTC’s performance. The launch of nearly a dozen spot BTC ETFs in January 2024 has led to a surge in institutional investment, with funds breaking $100 billion in net assets for the first time in November, according to data from Bloomberg Intelligence.
Surging Institutional Inflows: A Catalyst for Positive Demand Shocks
Crypto analysts at Steno Research expect BTC ETFs to see additional net inflows of $48 billion in 2025. Surging institutional inflows could cause positive ‘demand shocks’ for Bitcoin, potentially sending BTC’s price soaring in 2025, according to asset manager Sygnum Bank.
Passing the Bitcoin Act: A Catalyst for Accelerated Adoption
CoinShares stated that passing the Bitcoin Act would accelerate this further, eventually pushing BTC’s spot price past $1 million per coin. According to Adam Back, co-founder and CEO of Blockstream, "Combined with other governments following suit, such a development could catalyze a much larger flow of assets into Bitcoin in the years to come."
A Potential Catalyst for Mainstream Adoption
The proposed bills follow US regulators’ approval of nearly a dozen spot BTC ETFs. Several US states, including New Hampshire and North Dakota, have floated bills to create BTC reserves. The establishment of a strategic Bitcoin reserve in the United States would be a significant step towards mainstream adoption.
The Potential Impact on Institutional Investors
Passing the Bitcoin Act would effectively grant Bitcoin the endorsement of the world’s largest government, significantly diminishing the stigma faced by institutional investors. This could lead to increased institutional investment and potentially send BTC’s price soaring.
Conclusion
In conclusion, establishing a strategic Bitcoin reserve in the United States would have a more profound long-term impact on Bitcoin’s adoption than the launch of ETFs in 2024. Passing the Bitcoin Act would accelerate this further, eventually pushing BTC’s spot price past $1 million per coin. The establishment of a strategic Bitcoin reserve would be a significant step towards mainstream adoption and could catalyze a much larger flow of assets into Bitcoin in the years to come.
References
- CoinShares blog post: "The Potential Impact of the Bitcoin Act on Institutional Investors"
- Bloomberg Intelligence data: "Spot BTC ETFs Break $100 Billion in Net Assets for First Time"
- Sygnum Bank press release: "Surging Institutional Inflows Could Cause Positive Demand Shocks for Bitcoin"
