Author: Oluwapelumi Adejumo
Compiled by: Saoirse, Foresight News
Texas has officially taken the first step and is poised to become the first U.S. state to designate Bitcoin as a strategic reserve asset.
On November 25, Lee Bratcher, chairman of the Texas Blockchain Council, revealed that the world's eighth-largest economy, with a size of $2.7 trillion, had purchased $5 million worth of BlackRock Spot Bitcoin ETF (ticker symbol IBIT).
He added that once the state finalizes the custody and liquidity framework required by the new Reserve Act, the second $5 million grant will be used for the direct acquisition of Bitcoin.
These two funds will bridge the gap between the current institutional operating model and the future model of governments "not only buying Bitcoin, but also holding Bitcoin".
Texas develops first state-level Bitcoin reserve blueprint
Texas initially opted not to hold Bitcoin directly on-chain, but instead chose IBIT as its entry point. For large investors looking to allocate Bitcoin within a familiar regulatory and operational framework, IBIT has become the default choice.
The legal basis for this purchase is Senate Bill 21, which was signed by Governor Greg Abbott in June of this year and formally established the "Texas Strategic Bitcoin Reserve".
Under the framework of the bill, as long as Bitcoin maintains an average market capitalization of at least $500 billion over 24 months, the state auditor general has the authority to continue increasing his holdings of the asset. Currently, Bitcoin is the only cryptocurrency that meets this market capitalization threshold.
The reserve system is independent of the state treasury, has clearly defined governance processes related to asset holding, and has established an advisory committee to be responsible for risk monitoring and supervision.
Although the initial investment of $5 million is not a large amount compared to the overall fiscal size of Texas, the operational logic of this deal is far more significant than the size of the funds involved.
Texas is testing whether Bitcoin can be formally included in the public reserve system within a state-level financial system that already manages hundreds of billions of dollars in diversified funds.
Once the relevant operational procedures are in place, the second tranche of funds will be used for "self-holding Bitcoin"—a model that will have a drastically different impact on asset liquidity, transparency, and auditing processes.
Texas is currently designing a "sovereign-level custodian" process, rather than adopting a traditional institutional brokerage model. This reserve system will require qualified custodians, cold storage facilities, key management protocols, independent auditing mechanisms, and regular reporting systems.
These elements will form a replicable template that other states can directly adopt without redesigning their governance structures.
Why is BlackRock IBIT the top choice in Texas?
Choosing to enter the Bitcoin market through IBIT does not mean that Texas prefers ETFs to native Bitcoin; it is essentially a workaround based on practical experience.
Launched just two years ago, IBIT has become the most widely held Bitcoin ETF by mainstream institutions. As the largest Bitcoin ETF product to date, it has seen a cumulative net inflow of over $62 billion.
Furthermore, most regions have not yet established public sector Bitcoin self-custody systems, and building such infrastructure requires a series of complex processes, including procurement, security modeling, and policy approvals. Therefore, Texas is using IBIT as a "transitional tool"—to achieve Bitcoin asset allocation through IBIT while perfecting its permanent reserve architecture.
This "roundabout strategy" is highly relevant because it is very similar to the deployment paths of other large investors.
Harvard University disclosed that IBIT became one of its largest U.S. stock holdings in the third quarter of this year; the Abu Dhabi Investment Committee increased its IBIT holdings to approximately 8 million shares during the same period, a threefold increase from the previous amount; the Wisconsin pension system also allocated more than $160 million in the spot Bitcoin ETF sector through IBIT earlier this year.
The trend is clear: despite differences in investment objectives, geographic characteristics, and risk frameworks among various institutions, they have all unanimously chosen IBIT as a tool. The core advantages of IBIT are: providing custody services through well-known intermediaries, simplifying reporting processes, and complying with the clear accounting requirements under the new fair value rules that will take effect in 2025.
These advantages make IBIT the "default entry point" for public and quasi-public institutions to allocate Bitcoin. Texas's unique situation lies only in the fact that its allocation of Bitcoin through IBIT is a "temporary transition."
What impact would it have if other states followed suit?
The more crucial question is: Is this move by Texas an isolated case, or will it become a blueprint for other states to follow?
Bitcoin analyst Shanaka Anslem Perera stated:
"This chain reaction is predictable. In the next 18 months, it is expected that 4 to 8 states will follow suit, with these states collectively controlling more than $1.2 trillion in reserve funds. In the short term, driven by the 'bandwagon effect,' institutional inflows are expected to reach $300 million to $1.5 billion. This is not speculation, but a game theory practice in progress."
Currently, states with similar political stances, such as New Hampshire and Arizona, have enacted laws related to Bitcoin reserves—they view Bitcoin as a strategic asset for hedging against risks in the global financial system.
More states may join this effort in the future: with the new accounting standards eliminating the previous punitive "market value" clause, these states can use structured surplus funds to allocate Bitcoin and diversify their assets.
Furthermore, the impact of state-level government involvement in the Bitcoin market goes far beyond "symbolic significance." ETF purchases do not change the circulating supply of Bitcoin because the trust structure does not remove Bitcoin from the liquidity market when issuing and redeeming shares.
"Self-custody" has the opposite effect: once Bitcoin is purchased and moved to cold storage, it is removed from the tradable pool, resulting in a reduction in the supply of Bitcoin available to exchanges and market makers.
If Texas were to further expand its Bitcoin reserves from the initial $10 million, the aforementioned differences would have a significant impact. Even if state-level demand were small, it would introduce a new type of buyer – one whose behavior is counter-cyclical to that of "noise traders" (investors or trading entities in financial markets who trade not based on rational analysis, real market information, or fundamental logic, such as company profits or macroeconomic data, but driven by irrational factors) and who do not frequently adjust their positions.
This effect acts more like a "stabilizing anchor" than a source of volatility. If other states adopt similar policies, the elasticity of the Bitcoin supply curve will further decrease, while price sensitivity will increase.
