Key Takeaways
- The Texas Senate is holding a public hearing on February 18 to evaluate the prospect of a strategic Bitcoin reserve in the state. The Texas Strategic Bitcoin Reserve Bill or SB 21 was submitted to the Secretary of State on February 12.
- SB 21 is an updated version of the SB 778 bill introduced by Sen. Charles Schwertner that proposes establishing the reserve as an investment vehicle for the state to actively buy, sell, and manage BTC for financial security and economic resilience.
- The bill does away with the annual limit of $500 million to invest in BTC and Bitcoin-linked investment vehicles, thereby allowing the state the freedom to allocate as much funds as it wants into the crypto asset.
- Despite the optimism in the air, Bitcoin’s price has taken a major hit after the latest U.S. CPI numbers showed inflation to have climbed to 3%. Investors are taking a step back as they expect the Federal Reserve to continue with high interest rates.
The Texas State Senate is set to hold a public hearing on February 18 to evaluate the possibility of establishing a potential Bitcoin reserve. The “Texas Strategic Bitcoin Reserve Bill”, otherwise called the SB 21, was introduced by Senator Charles Schwertner in the Texas House of Representatives on February 12.
The legislature establishes the reserve as an investment vehicle for the state to actively buy, sell, and manage crypto assets for financial security and economic resilience. It has been submitted to the State Secretary’s office, subject to public comment before accepting or rejecting the proposal.
Texas To Hold Hearing For Updated Bitcoin Reserve Bill On February 18
SB 21 is slightly different from SB 778, which was a similar Bitcoin reserve bill introduced by the Republican senator last month. The earlier version proposed the creation of a special fund outside of the general revenue fund that would allow the state to own and hold Bitcoin as a financial asset while accepting BTC donations from the public. It also permits investments in other digital assets as long as their market capitalization is at least $500 billion, averaged over the past year.
It proposed implementing secure storage and management systems while mandating cold storage and regular audits for added transparency and security. The bill intends to limit the Bitcoin allocation to 1% of the Texas general revenue. However, the legislation only permitted the state to buy and hold Bitcoin as a strategic asset and prevented its use for other state operations unless explicitly authorized.
While SB 778 placed the control of the reserve in the hands of state legislators and would have implemented much stricter security, oversight, and funding rules, SB 21 offers more control over the Bitcoin reserve to financial experts.
Pierre Rochard, vice president of research at Bitcoin mining firm Riot Platforms, wrote in an X post that the new legislative text for the Texas Strategic Bitcoin Reserve is very bullish as it removes the annual buying limit of $500 million, allowing the state to allocate as much funds as it wants into BTC.
The first public hearing regarding the establishment of a potential strategic Bitcoin reserve in the Lone Star state comes less than a week after the bill was received by the Secretary of State, according to the Texas government’s website.
Texas Strategic Bitcoin Reserve Bill Not Expected To Cause Massive Market Moves, Suggests Nexo Analyst
Despite the optimism surrounding the prospect of Bitcoin adoption by a US state, some analysts suggest that it is hardly going to affect the market.
Speaking to Cointelegraph, Iliya Kalchev, dispatch analyst at Nexo, said that Texas considering BTC as a reserve asset is a chess move in the digital asset’s march toward institutional legitimacy. However, he claimed that when compared to Exchange-Traded Fund (ETF) inflows or corporate treasury allocations, state-level Bitcoin initiatives often make ripples, not waves.
He stated that the market’s response to the public hearing is likely to be mild because the state’s pro-crypto stance is already well known, unless, the hearing reveals a near-term purchase plan or a major policy shift led by the state.
Kulchev added that while Texas’ push for a Bitcoin reserve is positive news around the legislation under consideration in over 30 US states and is a welcome sign of continued institutional adoption, the apex cryptocurrency’s price trajectory is mainly driven by the monetary policy instilled by the Federal Reserve and regulatory shifts, which he referred to as the real power players.
Bitcoin Price Drops To $96,000 As U.S. Inflation Climbs To 3%
Bitcoin’s price dropped to $96,368 on Monday as the financial markets are weighing on the Fed’s remarks highlighting the implications of the U.S. Consumer Price Index (CPI) data for January, which showed inflation persisting above the central bank’s 2% target.
The market has been grappling with volatility in recent weeks and is facing increased downward pressure as investors have adopted a cautious stance amid concerns that the Fed is expected to maintain a hawkish stance for longer. A higher interest rate environment dampens investor appetite for speculative investments, such as crypto and stocks.
Market participants are waiting for comments from Federal Reserve officials, scheduled to speak later in the day. If the central bank signals a delay in rate cuts, then it could mean that BTC’s price will struggle.
Spot Bitcoin ETFs Suffer Fourth Consecutive Day of Outflows, $650.67 Million Exits The Funds Over The Past Week
Adding to the bearish sentiment, new reports show that the spot Bitcoin ETFs suffered their fourth consecutive day of outflows, totaling $159.69 million. Fidelity’s FBTC and ARK 21 Shares’ ARKB led the rout, experiencing $94.46 million and $52.73 million in outflows, respectively. Other ETFs like Bitwise’s BITB ($15.69 million), Franklin Templeton’s EZBC ($8.35 million), Grayscale’s GBTC ($6.86 million), and Invesco’s BTCO ($4.81 million) also saw outflows.
Out of the total loss of $650.76 million over the past week, FBTC directly contributed 57% of the outflows as $376.15 million exited the second-largest spot Bitcoin ETF. The Bitcoin investment fund issued by Wall Street giant Fidelity holds BTC worth $20.32 billion as of December 2024.
Analysts have attributed this trend to various factors, including profit-taking moves by investors following Bitcoin’s strong rally earlier in the year, regulatory uncertainties, and a border risk-off mood in the traditional markets.
At the time of writing, Bitcoin (BTC) is trading at $96,222 – down 1.05% in the last 24 hours.