tl;dr
Polkadot has proposed creating a Strategic Bitcoin Reserve by converting 500,000 DOT (about $2 million) into Threshold Bitcoin (tBTC), a decentralized wrapped Bitcoin. Before conversion, the DOT will be staked in aDOT to generate yield and improve DeFi liquidity. The BTC conversion will occur gradua...
Polkadot has proposed converting 500,000 DOT tokens, valued at approximately $2 million, into a decentralized wrapped Bitcoin known as Threshold Bitcoin (tBTC) to stabilize its treasury amid a market downturn. This Strategic Bitcoin Reserve aims to diversify Polkadot's assets, reduce exposure to DOT’s price volatility, and maintain treasury value during recent declines.
Before initiating the conversion, the DOT will be staked in aDOT to generate yield and enhance decentralized finance (DeFi) liquidity. The Bitcoin conversion will be executed gradually over the course of a year using a dollar-cost averaging (DCA) strategy, allowing for daily incremental purchases. Accumulated tBTC will then be added in small portions to liquidity pools within the Hydration Omnipool.
This move aligns Polkadot with a growing trend in the industry where organizations adopt Bitcoin as a strategic reserve asset to hedge against economic instability and currency devaluation. Presently, Polkadot’s DOT token has experienced significant price drops, falling to its lowest levels since October 2023 and losing over 62% of its value against Bitcoin over the past year.
Supporters emphasize that the Strategic Bitcoin Reserve is intended strictly for treasury diversification and not for transactional use, with control maintained by the treasury. The initiative is seen as a forward-thinking step poised to reduce market risk and create fresh opportunities within Polkadot’s DeFi ecosystem while preserving funds for future projects.
At the time of the proposal, Polkadot holds the #22 spot in market capitalization with approximately $6.08 billion and a 24-hour trading volume nearing $350 million. Amid a total crypto market valued at $3.29 trillion and Bitcoin dominance at 63.89%, this strategy highlights Polkadot’s attempt to navigate turbulent market waters by securing part of its treasury in Bitcoin.