A U.S. bitcoin strategic reserve would be a ticking time bomb, warns Arthur Hayes, predicting political manipulation, market chaos, and a government ready to dump BTC at will.
Arthur Hayes on the Dangers of a US Bitcoin Strategic Reserve
Arthur Hayes, former CEO of crypto exchange Bitmex, published an essay on Feb. 5, where he critiques the idea of a U.S. Bitcoin Strategic Reserve (BSR) and regulatory policies surrounding crypto under the Trump administration. He argues that many in the crypto industry mistakenly believe government intervention will benefit them, stating: “Broadly speaking, many misguided crypto folks wish for the U.S. government to print dollars and purchase bitcoin as part of a national stockpile and to enact regulatory moats around crypto businesses in which they have a financial interest.”
Hayes warns that government-controlled bitcoin reserves would be subject to political whims rather than sound financial strategy. He detailed:
Let’s assume that Trump is able to create a BSR. The government buys one million bitcoin, as suggested by U.S. Senator Lummis. Boom! The price goes nuts. Then, the buying concludes, and the up-only trend channel stops.
He warned that the move would create short-term volatility instead of long-term stability and noted that a future administration, especially a Democrat-led one, might view bitcoin reserves as a readily available source of liquidity.
The former Bitmex executive cautioned:
There are one million bitcoin just sitting there, ready to be sold; it just takes a signature on a piece of paper. The market would rightly fear when and how these bitcoin would be sold.
Hayes expands on this risk, explaining that political motivations would dictate the buying and selling of bitcoin, rather than economic strategy. “What can be bought can be sold. The fundamental problem when a government stockpiles any asset is that they buy and sell the asset primarily for political, and not financial, gains,” he wrote, dismissing the idea that U.S. policymakers would view bitcoin as anything more than a tool for appeasing their base. Instead of enhancing bitcoin’s role as a decentralized asset, he argues, government involvement would create uncertainty and potentially cap enthusiasm in the market.
Instead of government stockpiling, Hayes proposes an alternative strategy in which the U.S. Treasury gradually integrates bitcoin into the financial system by using it as a reserve asset rather than holding it outright. He suggests a progressive devaluation of the dollar against bitcoin, ensuring that the asset’s value increases while maintaining dollar supremacy in trade. Hayes also advocates for a legal framework that protects bitcoin as a form of speech, ensuring that miners and blockchain participants can operate without government interference.
Despite Trump’s apparent friendliness toward crypto, Hayes remains skeptical of meaningful policy changes, predicting a potential retrace of bitcoin to the $70,000-$75,000 range unless the Federal Reserve or U.S. Treasury enacts monetary stimulus or favorable legislation. He urges crypto holders to take an active role in shaping policy rather than passively expecting politicians to act in their favor, warning that otherwise, crypto regulation will be dictated by those with financial interests in maintaining centralized control.