## Texas Pragmatism: Why BlackRock's ETF Leads the Reserve Fund Strategy in Bitcoin

Texas has just taken a historic step: becoming the first U.S. state to formally establish reserve funds based on bitcoin. But the interesting part is not just that it entered the market, but *how* it did so. Contrary to many expectations, the Texas state chose IBIT, BlackRock's spot bitcoin ETF, before considering direct self-custody.

### The Pragmatic Decision: IBIT as an Entry Point

When the Texas Blockchain Council announced on November 25 that the state had already acquired $5 million in IBIT, it was not an ideological choice but an operational one. The reason: building a sovereign bitcoin custody infrastructure requires complex processes that are still in development. Meanwhile, IBIT offers what public institutions need now: verified custody, transparent reporting, and accounting compliance under standards that will come into effect in 2025.

IBIT is not a new product, but its institutional adoption has been explosive. In just two years since its launch, it accumulated over $62 billion in net flows, becoming the largest bitcoin ETF in the market. Harvard University revealed that it is now one of its largest holdings; Abu Dhabi Investment Authority doubled its stake to 8 million shares; Wisconsin allocated $160 million exclusively through this product.

The trend is clear: when large institutions seek exposure to bitcoin within recognized regulatory frameworks, IBIT has become the default tool.

### From Transition to Transformation: Reserve Funds in Action

But here’s the crucial part: the initial $5 million in IBIT is only the first act. Senate Bill No. 21, signed by Governor Greg Abbott, authorizes a second allocation of the same amount for direct bitcoin purchase once the state implements its self-custody system.

With bitcoin currently trading at $90.80K and a market capitalization of $1,813.67B, the threshold set by law — an average of $500 billion over 24 months — ensures that bitcoin will remain the only eligible crypto asset for these state reserve funds.

This dual structure reveals Texas’s true strategy: using IBIT as a transitional tool while designing a completely new "sovereign custody" model. The second fund will utilize cold storage, independent key management protocols, and regular audits. The important part is that this model will be replicable: other states will be able to adopt it without redesigning their entire governance.

### The Domino Effect: When Texas Inspires Other States

The real question is whether this will be an isolated case or the start of a chain reaction. Analyst Shanaka Anslem Perera makes it clear:

> "Between 4 and 8 states will follow this example in the next 18 months, with combined reserve funds exceeding $1.2 trillion. The resulting institutional flows would reach between $300 million and $1.5 billion."

This is not speculation. New Hampshire and Arizona already have similar laws in progress, considering bitcoin as a hedge against global systemic risks. As new accounting standards eliminate punitive mark-to-market clauses, more states will use their structural surpluses to diversify through bitcoin.

### The Real Impact: Beyond the Symbol

What many overlook is that this is not just a political gesture. ETF flows do not affect the circulating supply of bitcoin; they simply reorganize ownership. But "self-custody" works differently: when bitcoin is transferred to cold storage, it exits the tradable liquidity market. It reduces the amount available to traders and market makers.

If Texas expands its reserve beyond the initial $10 million, this effect will be significant. And if other states do the same, the elasticity of the supply curve will decrease dramatically, increasing price sensitivity.

Moreover, governments are countercyclical participants: they do not frequently adjust positions, nor do they operate on "noise." They function as anchors of stability, not sources of volatility. This fundamentally changes market dynamics.