Polkadot Proposes 501,000 DOT Bitcoin Reserve Using DCA Strategy

Polkadot community members have proposed a strategic initiative to create a Bitcoin reserve using the network’s treasury funds. The plan involves converting 501,000 DOT into tBTC over a year through an automated dollar-cost averaging system. This initiative aims to deploy the accumulated tBTC in DeFi liquidity pools using a non-custodial bridge, aligning with the broader trend of major entities, governments, corporations, and protocols exploring Bitcoin holdings as a long-term reserve asset.

The proposal, outlined in the Polkadot governance form, suggests a 12-month recurring purchase program to gradually acquire tBTC, a wrapped token on Ethereum pegged to Bitcoin. The conversion process from DOT to tBTC will occur via a rolling DCA (dollar-cost averaging) mechanism, an automated system that consistently invests funds into tBTC purchases without manual intervention. This strategy reduces exposure to short-term market fluctuations by diversifying purchases over time.

The acquired tBTC will be deposited into the Omnipool of Hydration, introducing liquidity and making Bitcoin-backed assets available to DeFi users within the Polkadot ecosystem. The transaction route will utilize the non-custodial Bitcoin bridge of the Threshold Network, ensuring that custody remains under the control of the decentralized network. This approach eliminates custodial issues, allowing for the safe transfer of assets across Bitcoin and Ethereum-compatible environments without counterparty risk.

The rolling DCA mechanism of Hydration permits repeated DOT swaps for tBTC, enabling automated purchasing. Each transaction is designed to be small in size, maintaining low execution risk. Based on the suggested rate, 1 DOT would purchase around 0.000041 tBTC. The process ensures gradual exposure, with limited impact on token prices or treasury reserves at any one time. Small amounts of tBTC, approximately 0.005 per transaction, will be deposited into the Omnipool, providing consistent liquidity while supporting cross-chain usage of Bitcoin-backed assets.

The Polkadot community is now debating whether exposure to Bitcoin can enhance the long-term stability of the treasury assets. This strategy is part of an industry-wide movement where institutions are attempting to hedge volatility and currency devaluation with digital reserves. The proposal places Polkadot in line with the decentralized governance model, aligning with the trend of governments and corporations accumulating BTC in their treasuries. However, recent news indicates that the strategy advocated by Michael Saylor is contributing to increasing concentration risks, as the company has acquired close to 3% of the total supply of BTC and aims to acquire 5%, which may compromise the decentralized selling point of Bitcoin.