Haider Rafique, global managing partner for government and investor relations at crypto exchange OKX, has expressed concerns that establishing a national Bitcoin (BTC) strategic reserve could negatively impact both BTC and the US dollar.
Rafique informed Cointelegraph that if a government possesses large amounts of BTC, it could potentially influence prices by liquidating its holdings in the market, undermining BTC’s fundamental attributes as neutral, decentralized currency.
He posed the question: “What happens in a few years if a new administration decides this was a bad idea?” Rafique continued:
“Despite recent bipartisan support for crypto, it is essential to remember that administrative policies can change quickly. As circumstances evolve, a significant concentration of BTC on a country’s balance sheet might indicate a liquidation risk.”
In 2024, the German government illustrated this point by selling 50,000 BTC, which kept prices under the $60,000 mark, according to Rafique.
The idea of a Bitcoin strategic reserve remains a priority for many advocates, who argue that forming such a national BTC treasury is pivotal for Bitcoin to evolve into a global reserve currency and a standard monetary unit of account.
Related: US lawmakers tap Saylor, Lee to advance Bitcoin reserve bill
Risks to the US dollar and other financial markets
Rafique warned that a Bitcoin strategic reserve could generate ripple effects beyond the cryptocurrency markets, impacting the broader macroeconomic landscape.
“The most significant macroeconomic consequence would be a loss of confidence in the dollar,” he pointed out.
He explained that creating a Bitcoin reserve suggests that the US dollar, which is fundamental to the global economy, is weak and incapable of maintaining its value based solely on economic strength.
This scenario could trigger widespread disruptions in the financial system, as investors might move away from the US dollar towards safer assets like gold or the Swiss franc, according to Rafique.
Moreover, investors could offload riskier assets, leading to a chain reaction of liquidations across financial markets that could ultimately result in a substantial crash as markets adjust to this major shift in global finance, he concluded.
Magazine: US risks being ‘front run’ on Bitcoin reserve by other nations: Samson Mow
