If the national reserve is empty, can Bitcoin still break through $150,000?

In 2024, Bitcoin became the world's best performing asset with a 135% increase. However, the market is no stranger to Bitcoin's stunning performance. After all, in the past decade, Bitcoin has topped the throne of the world's strongest asset eight times. It is no exaggeration to say that long-term holding of Bitcoin has become the best strategy to win in the past decade. Looking ahead to 2025, almost most institutions are highly optimistic about the Bitcoin market in 2025. According to Coindesk, CoinShares, Galaxy Digital, VanEck, Bitwise, Standard Chartered Bank and other eight institutions predict that the lower limit of Bitcoin's target range in 2025 is US$150,000. So, can Bitcoin continue its glory in 2024?

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The author believes that Bitcoin still has the potential to hit a new all-time high in 2025, but the author has a different opinion on the degree of optimism about the market.

As we all know, the optimistic expectations of most institutions are mainly based on the fact that the proportion of Bitcoin in institutional portfolios will further increase. The basis for this expectation to be realized requires Trump to fulfill his promise to include Bitcoin in the national reserves. According to the World Gold Council, as of September 2024, the size of the US gold reserves is 8,133.5 tons, worth about $700 billion. Considering that the circulating market value of Bitcoin is about one-tenth of gold, the theoretical size of the US Bitcoin reserves will reach $70 billion. Even if the US government has obtained about $20 billion worth of Bitcoin through law enforcement, its theoretical purchase space can still reach $50 billion.

In addition, US pension funds generally allocate 1%-2% of their funds to gold, with a scale ranging from US$400 billion to US$800 billion. However, pension funds allocate almost nothing to Bitcoin (only a few hundred million dollars). If the country takes the lead in allocating Bitcoin, pension funds and large companies will inevitably follow suit, which will bring huge growth to the crypto market.

It is safe to say that the inclusion of Bitcoin in the national reserve will boost the crypto market no less than the approval of the Bitcoin ETF. As long as this goal is achieved, it is entirely natural for Bitcoin to break through $150,000 in 2025. However, the key point is that it is not easy for Trump to make Bitcoin a national reserve.

Currently, there are three main ways for Trump to quickly build a national reserve of Bitcoin:

First, the Fed purchases Bitcoin through open market operations and includes it in its balance sheet. This move only requires a vote by the FOMC and does not require approval from Congress.

Second, after taking office, Trump signed an executive order instructing the U.S. Treasury to use the Exchange Stabilization Fund (ESF) to directly purchase Bitcoin.

Third, the Ministry of Finance establishes a special government Bitcoin investment plan and clarifies the source of funds (such as issuing government bonds or fiscal allocations), which is then implemented after approval by Congress.

Judging from the current situation, the possibility of realizing the inclusion of Bitcoin in national reserves through the Federal Reserve is very small. First of all, the Federal Reserve's open market operations mainly involve government bonds and government-backed securities, and there is almost no record of buying gold, let alone buying highly volatile assets such as Bitcoin.

Secondly, on December 20, Fed Chairman Powell made it clear at a press conference after the monetary policy meeting that the Fed has no intention of participating in any government plan to hoard Bitcoin. He stressed that such issues should be the responsibility of Congress, and the Fed has not sought to amend existing laws to allow the holding of Bitcoin. Powell's statement was interpreted by the outside world as a veiled opposition to the Bitcoin national reserve plan.

The establishment of a special fiscal investment plan is considered to be a solution with more long-term legal support. However, the use of fiscal revenue involves budget allocation, and the issuance of bonds involves government financing, both of which require approval from Congress. This makes the implementation of the fiscal plan a long process and full of uncertainty.

In summary, the second method - Trump instructs the Treasury Department to use the Exchange Stabilization Fund (ESF) to purchase Bitcoin through an executive order - is the most feasible option within the authority of the US President. However, even if this approach is theoretically feasible, it still faces multiple challenges, especially congressional oversight and political risks.

To some extent, the Fed's attitude reflects the position of Wall Street. It is feasible for these vested interests to increase their income by increasing Bitcoin business, but it is almost impossible for them to give up their financial dominance and pave the way for Bitcoin. As predicted by David Sacks, the White House's encryption director, it may take a catastrophic sovereign currency crisis for the market to recognize Bitcoin as a mainstream currency. Therefore, after Powell's speech, PolyMarket's trading pricing showed that the probability of Bitcoin becoming a US national reserve fell from 36% on December 20, 2024 to 24% on January 3, 2025.

From a macro perspective, 2025 is also the year when black swans are most likely to occur in the global capital market.

First, affected by the rebound in inflation and the imposition of tariffs, the market generally lowered its expectations for the Fed's interest rate cuts next year, and some Wall Street institutions have even predicted that interest rates will start to rise in the second half of next year. Therefore, the yield on the 10-year U.S. Treasury bond continued to rise against the backdrop of the Fed's interest rate cuts, exceeding the federal funds rate for the first time in nearly two years. This has created a clear crowding-out effect on the liquidity of risky assets.

Secondly, against the backdrop of the Fed's balance sheet reduction, the US expansionary fiscal policy is a key factor supporting the prosperity of the US stock and consumer markets. If the new government significantly cuts government spending, the market will face the risk of losing momentum support.

Of course, I do not think that the positive effects of Trump's new crypto policy have been fully digested by the market. However, these positive factors have brought more trading opportunities to the market, such as opportunities for Bitcoin band operations and opportunities in certain crypto segments (such as asset tokenization, AI Agent, DeFi, etc.). In terms of operation, I tend to believe that Bitcoin will rise by 30% to 40% in 2025, with a corresponding target range of US$122,000-US$130,000. Therefore, it is also a relatively stable strategy to appropriately reduce positions above US$122,000. ‍‍‍‍