Polkadot seeks stability with $2M Bitcoin reserve strategy amid DOT downturn

A new proposal within the Polkadot ecosystem is pushing for the creation of a Strategic Bitcoin Reserve.

According to the proposal, the plan involves converting 500,000 DOT, valued at around $2 million, into Threshold Bitcoin (tBTC), a wrapped version of Bitcoin secured through threshold cryptography, which ensures decentralization and non-custodial management.

Bitcoins Polkadot’s Bitcoin proposal

Before conversion to Bitcoin begins, the 500,000 DOT will first be staked in aDOT, a yield-generating collateral token.

This will allow the treasury to earn returns on its DOT holdings while increasing liquidity for DeFi borrowing.

Additionally, 1,000 DOT will be set aside to cover transaction fees involved in executing this strategy.

From there, the Polkadot treasury would execute the BTC conversion gradually over a year, using Hydration’s rolling dollar-cost averaging (DCA) feature. This method enables daily, incremental purchases to maintain a steady Bitcoin inflow.

Once enough tBTC is accumulated, portions of it (0.005 tBTC per transaction) would be added as liquidity to the Hydration Omnipool. The proposal stated:

“This is intended as a first step towards diversification into Bitcoin where future proposals could include other bridged BTC assets. The tBTC stays under the control of the Treasury and is intended to be maintained as a reserve, not a pool for payments.”

Supporters of the plan say the move would reduce exposure to market swings and create new opportunities for DeFi on Polkadot. The reserve is also designed to preserve the treasury’s value and ensure sufficient funds for future budgets.

Meanwhile, Polkadot’s move mirrors a broader industry shift of organizations and governments viewing Bitcoin as a strategic reserve asset to hedge against economic instability and currency devaluation.

Data compiled by Hodl15Capital shows that the top 100 corporate holders of the top crypto hold more than 818,000 Bitcoin in their coffers.

Bitcoins DOT’s price struggles

Polkadot’s interest in building a Bitcoin reserve comes as its DOT token faces market challenges.

According to CryptoSlate’s data, DOT’s price has dropped 7% in the last 24 hours to $3.80, its lowest level since October 2023.

In Bitcoin terms, the token has fallen to an all-time low of 0.00003658 BTC, losing over 62% of its value in the past year.

Disclaimer: CryptoSlate has received a grant from the Polkadot Foundation to produce content about the Polkadot ecosystem. While the Foundation supports our coverage, we maintain full editorial independence and control over the content we publish.

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