Bitcoin’s rise in value has reached a critical milestone. With its market capitalization now standing at $1.87 trillion, Bitcoin has reached a size that some financial institutions believe makes it a viable candidate for becoming a U.S. government reserve asset. According to a report by Morgan Stanley, the cryptocurrency has grown large enough to be considered within the ranks of traditional reserve assets like gold, despite its inherent volatility. While Bitcoin’s current volatility may be a hurdle, there’s a strong case that its growing stability and adoption could lead to a more prominent role in global reserves in the future.

Bitcoin’s Market Capitalization and Potential for Reserve Status

Morgan Stanley’s report emphasized that Bitcoin’s market capitalization is now comparable to traditional reserve assets in terms of global market capitalization weight. The financial institution estimates that a $370 billion allocation to Bitcoin would match the proportion of Bitcoin’s total market capitalization on a global scale. This would align closely with how other reserve assets, such as gold, are proportioned in the world’s financial systems.

For context, Bitcoin has become one of the largest assets in the world. Its market capitalization of $1.87 trillion places it on par with some of the largest traditional assets. While Bitcoin is still far from gold’s $13 trillion market cap, its growth trajectory has caught the attention of financial analysts and policymakers. If Bitcoin continues to grow and stabilize, it could eventually be seen as an alternative to traditional reserve assets, something that many have speculated about since the asset first emerged.

However, despite these bullish projections, there are challenges. The primary concern surrounding Bitcoin’s potential as a reserve asset is its volatility. Unlike traditional reserve currencies, which typically show price stability over time, Bitcoin’s price has been known to experience sharp fluctuations. This level of volatility makes Bitcoin a risky candidate for reserve status, especially for a country like the United States, which depends on the stability of its reserve assets to maintain financial stability.

Bitcoin’s Volatility and the Need for Stability

Morgan Stanley’s report acknowledges Bitcoin’s volatility as a significant issue. Although Bitcoin’s volatility has been a defining characteristic since its inception, it has been gradually decreasing over time. Experts like Bitcoin advocate Troy Cross have pointed out that as Bitcoin matures and as more institutional investors adopt the cryptocurrency, its volatility is likely to decrease further. This stabilization is essential if Bitcoin is to be considered for the role of a reserve asset.

Cross also emphasized that Bitcoin’s declining volatility trend could lead to its adoption as a reserve asset much faster than many anticipate. Once Bitcoin stabilizes below certain volatility thresholds, its adoption as a reserve could accelerate sharply. The growth of institutional investment and adoption, alongside improvements in blockchain technology and Bitcoin infrastructure, is expected to reduce Bitcoin’s price swings over time, making it a more suitable asset for reserve purposes.

The Trump Administration and Strategic Bitcoin Reserve

Bitcoin’s potential inclusion in the U.S. reserve system has gained traction, with the Trump administration advancing plans for a Strategic Bitcoin Reserve. In March 2025, an executive order was issued, directing the formation of a federal entity to custody Bitcoin assets. The proposal has drawn comparisons to the way the U.S. holds gold in Fort Knox.

The idea behind a Strategic Bitcoin Reserve is to help the U.S. hedge against global economic risks, such as inflation and currency devaluation. By holding Bitcoin as part of the U.S. reserve assets, the government would be diversifying its holdings, ensuring a more stable economic future, especially in the face of potential crises.

However, not everyone agrees with the notion of a national Bitcoin reserve. Critics, such as financial commentator Kevin O’Leary, have voiced skepticism. O’Leary dismissed the Bitcoin Reserve Bill, claiming that the strategy behind it is flawed. He criticized Michael Saylor’s firm, which has heavily invested in Bitcoin, alleging that Saylor’s Bitcoin accumulation model relies on selling shares and raising capital through debt, creating a valuation model he believes is unsustainable.

International Perspectives on Bitcoin Reserves

While the U.S. seems to be embracing the idea of a Bitcoin reserve, other countries remain cautious. The United Kingdom has ruled out holding Bitcoin as a reserve asset. Economic Secretary to the Treasury Emma Reynolds recently confirmed this decision, highlighting the UK’s focus on regulation and the use of blockchain technology for public finance systems, rather than investing in Bitcoin itself.

Similarly, the Swiss National Bank (SNB) has echoed concerns about Bitcoin’s liquidity and volatility. In a statement during the SNB’s General Assembly, President Martin Schlegel stated that cryptocurrencies, including Bitcoin, do not yet meet the criteria for reserve assets due to their volatility and the potential for liquidity issues during crises. Despite this, the SNB is exploring the use of blockchain for other financial innovations.

Conclusion

Bitcoin’s emergence as a possible U.S. reserve asset is an indication of the growing influence of cryptocurrencies in the global financial landscape. Morgan Stanley’s report underscores the fact that Bitcoin’s market capitalization is now large enough to be considered as part of the U.S. reserve system, even though its volatility remains a hurdle.

The Trump administration’s efforts to create a Strategic Bitcoin Reserve could be a significant step forward in integrating Bitcoin into the financial infrastructure of the U.S., but challenges remain. As Bitcoin matures and stabilizes, it could become a more viable candidate for reserve status. However, until its volatility is sufficiently reduced, Bitcoin may not be able to fully replace traditional reserve assets like gold in the eyes of policymakers and financial institutions.