State Auditor Andrew Sorell is calling on Alabama to lead the nation by establishing a strategic Bitcoin reserve. He believes this will drive business and investment to Alabama as a "crypto-friendly state."
Part of President-elect Donald Trump's success in the presidential election was his receptiveness to Bitcoin and other cryptocurrencies.
Since election day, Bitcoin's price has skyrocketed over 50%, making Trump's vow to create a "national Bitcoin stockpile" a more tangible reality in July. Trump has also met with top crypto executives during his campaign, furthering the president-elect's growing support for the technology and its place in the nation's economy.
U.S. Sen. Cynthia Lummis (R-Wyo.) has already introduced the Boosting Innovation, Technology and Competitiveness through Optimized Investment Nationwide (BITCOIN) Act, which would require the U.S. Treasury to create a strategic Bitcoin reserve. Supporters of bitcoin reserves believe they can help the U.S. address national debt while strengthening the dollar and protecting against inflation.
Other states are considering strategic crypto reserves to bolster individual states' holdings outside the federal sphere.
Sorrell, who has been one of the longest-term supporters of crypto in Alabama state politics, believes that states increasing their holdings in the growing technology will ultimately attract business and state investments.
"believe in diversification," Sorrell told 1819 News. "A well-balanced portfolio should include exposure to many different types of asset classes. As of now, crypto is a $3 trillion asset class that the state has zero exposure to. It is also the most rapidly growing asset class (averaging an astounding 55% a year for the last 15 years), with the greatest potential for price appreciation. Investing in Treasuries and bonds certainly has its place, but earning a 4% yield while inflation is 2.7% is barely breaking even."
"Secondly, Alabama would position itself as a crypto-friendly state. I believe that the states that embrace new technologies will stand to benefit from those industries' growth the most. Crypto is here to stay. Nearly 500 million people worldwide own cryptocurrency. The debate over whether crypto will succeed has ended. Now, the fight for which states will benefit from it has begun. The states that are first to adopt a tax and regulatory framework that are friendly to crypto will attract business and investment.
He continued, "It would diversify our investments away from dollar-denominated assets. Currently, all of our investments are U.S. Dollar based. What happens if the dollar ceases to be the reserve currency of the world? What happens if inflation runs 8% again like it did during the post-pandemic era? Bitcoin's value is unaffected by what happens to the U.S. dollar (or could even benefit from the dollar's demise, one might argue.) It would strengthen our state's balance sheet and could be used as collateral for future debt issuances."
States like Florida and Pennsylvania are currently debating models for holding a Bitcoin reserve. Since states holding crypto investments are so novel, the details are still being worked out.
For Sorrell, since the Securities and Exchange Commission (SEC) authorized Bitcoin and Ethereum exchange-traded funds (ETFs) this year, states can buy into Crypto as easily as they can purchase stock through a traditional brokerage account.
"We can model Alabama's Bitcoin reserve after the federal American Strategic Bitcoin Reserve that Donald Trump promised to start when he spoke at the Bitcoin conference on the campaign trail for President," Sorrell said. "The U.S. Government already owns 207,189 bitcoins, acquired through various seizures, worth $20 billion dollars and representing over 1% of the world's bitcoin supply. Those were slated to be sold, but Trump has pledged to keep them and possibly even add more to the stack. This is further proof that crypto is becoming mainstream."
He continued, "The framework the state should follow would be to dollar-cost-average our way in over a period of 2 years. Bitcoin just crossed over $100,000 recently, so buying into a bull market may not be the best timing. A better strategy is monthly purchases over a 2-year period that average out your entry price."
Although Sorrell is all-in on the idea of a Bitcoin strategic reserve, he advocates for a gradual approach to investment, ignoring short-term market trends and focusing on long-term returns. Sorrell said any crypto reserve would remain untouched except for a potentially state-crippling disaster.
"Ownership in rapidly growing asset classes always comes with increased volatility. Therefore, care should be taken when entering the position and should be done in a gradual manner," Sorrell explained. "It should also be done with a long-term view in mind. The idea is for a Bitcoin reserve…not to flip it for a quick profit. It is highly likely Bitcoin will one day reach $1 million per coin. The individuals and institutions that have done the best with Bitcoin investing are the ones that have bought and held for the long-term, ignoring the short-term price fluctuations and continuing to stack Satoshis (a crypto term for the smallest unit of Bitcoin)."
To connect with the author of this story or to comment, email craig.monger@1819news.com.
Don't miss out! Subscribe to our newsletter and get our top stories every weekday morning.
