The Pentagon crushed 1 billion to stockpile Chinese rare earth substitutes! Why is the price of Bitcoin following the riot?

The Pentagon initiates a $1 billion critical mineral stockpiling program, aiming to reduce dependence on Chinese rare earths. After China controls 70% of the global rare earth production and implements the strictest export controls in history, Trump retaliates with a 100% tariff increase, causing the Bitcoin price to fall 13%. However, China softened its stance over the weekend, providing room for negotiations, leading to a rebound in the cryptocurrency market on October 13.

Pentagon's $1 billion gamble: Strategic shift from oil to China's rare earths

The Pentagon usually does not engage in commodity speculation, but when national security is threatened, old rules are broken. According to a report by the Financial Times, the U.S. Department of Defense has initiated a massive $1 billion operation to stockpile critical minerals such as Chinese rare earths. This procurement plan covers strategic metals needed for everything from rare earths to electric vehicles, fighter jets, and semiconductors, with the goal of enhancing domestic resilience and breaking free from reliance on Chinese supply chains, which have proven to be highly unreliable and fraught with geopolitical risks.

This $1 billion procurement is part of a global reserve action against China's dominance in rare earth elements, highlighting a significant shift in strategic focus, echoing the oil reserve programs of the Cold War era. The strategic resources of that time were oil, and today they are lithium, cobalt, nickel, and Chinese rare earths—essentially key elements found in Tesla cars, missile guidance systems, smart bombs, and high-frequency radars. This shift reflects a fundamental change in the nature of modern warfare and economic competition, where controlling rare earths equates to controlling the lifeblood of future technology.

China's monopoly position in rare earths has been established through decades of strategic investment. China controls about 70% of global rare earth mining and up to 93% of permanent magnet production, which gives Beijing a powerful geopolitical weapon. After China imposed new export restrictions on its rare earths and other strategic materials, the supply chain stress reached a critical point, immediately triggering shocks in international markets, including the price of Bitcoin. Trump angrily responded on Truth Social: "China is becoming very hostile, sending letters to countries around the world indicating they wish to impose export controls on every production factor related to rare earths."

The Pentagon's stockpiling of minerals is not a speculative move, but a defensive posture. This is one of the largest mineral procurement actions in decades, and Washington is not fighting alone. Brussels and its European allies are racing to catch up, stockpiling resources for war risks and energy transition. This global resource scramble is not only reshaping the geopolitical landscape but also profoundly affecting the price of Bitcoin and the trends of other risk assets.

China's Rare Earth Strategy Softens: Weekend Releases Negotiation Space

(Source: Reuters)

Just as market panic reached its peak, there was a sudden development over the weekend. China defended its recent rare earth export control measures, stating that they are "legal" and comply with international law, aimed at maintaining global peace and stability rather than provoking an economic war. More importantly, China clarified that these controls are not an absolute ban, and export applications that meet the standards will still be approved, keeping communication channels open with major trading partners.

This relatively mild wording immediately began to ease investors' nervousness. As China signaled flexibility and room for negotiation, analysts began to reconsider previous extreme risk scenarios. If concerns over China's rare earth supply chain dissipate and global trade frictions ease, the possibility of reopening dialogue and Beijing taking a more moderate stance could trigger a rebound in commodity prices, gold, and even Bitcoin. As commented by the Kobeissi Letter: "If President Trump responds and eases the situation, the market will rise significantly on October 13."

Sun Yun, the China Project Director at the Washington Institute, pointed out that Beijing's move is a response to the recent sanctions from the United States, but there is still room for de-escalation between the two sides. "This is an asymmetric response; Beijing believes that easing must be mutual, especially where there is still room for maneuver at the execution level." Gracelin Baskaran, Director of the Key Minerals Security Project at CSIS, stated that China's restrictions on rare earths weaken the United States' ability to develop its industrial base, but also serve as a powerful negotiation tool. This dual nature suggests that the rare earth issue may become a central topic in US-China negotiations rather than an irreconcilable confrontation.

Bitcoin Price and Gold: Resource Wars Redefining Value Storage

The China rare earth crisis and the Pentagon's resource hoarding plan are redefining the concept of "value storage," which has profound impacts on the price of Bitcoin and the gold market. Whenever governments hoard gold and resource nationalism rises, gold's status as the ultimate safe-haven asset is reinforced. However, this time, the situation is different. The rush for strategic minerals like battery metals and Chinese rare earths indicates that "strategic value" is surpassing traditional gold bars in the basement.

Commodity investors may see a fundamental shift in portfolio strategies. Gold retains its position as the ultimate hedge tool, but now it is joined by new "safe minerals" as protection against geopolitical shocks. If tensions over China's rare earths escalate, gold may benefit from new inflows of hedge funds. However, if China's softer stance leads to constructive negotiations and supply chain stability, gold's upward momentum may be suppressed by a broader rebound in risk appetite.

As for the price of Bitcoin, its appeal as "digital gold" always depends on scarcity, censorship resistance, and separation from the physical world. The Pentagon's hoarding of minerals highlights Bitcoin's unique paradox: it is not affected by supply chain disruptions like China's rare earths, yet is exposed to broader risk-off sentiment. During the market turmoil triggered by the Chinese rare earth crisis, the price of Bitcoin fell by more than 13%, dropping from $122,000 to $102,000, showing that it behaves more like a risk asset rather than a safe haven in times of extreme panic.

However, in the long run, the China rare earth war may highlight the value of Bitcoin. When governments around the world engage in fierce competition for control over physical resources, a fully digital and non-physical asset value storage tool becomes particularly attractive. Although Bitcoin's price is temporarily affected by geopolitical events, it will not lose its functionality simply because a country monopolizes the supply. This independence is the fundamental difference between Bitcoin and traditional strategic resources like gold or Chinese rare earths.

Historically, during periods of macroeconomic uncertainty, Bitcoin miners' reserves tend to expand, even though the price of Bitcoin itself may trade more like risk-on tech stocks in the short term. At the same time, supply chain disruptions in the hardware market (chips, mining machines, and semiconductors all rely on Chinese rare earths) could trigger a chain reaction in the Bitcoin mining economy, raising mining costs and potentially impacting the long-term support level of Bitcoin prices.

Investment Logic in the Era of Resource Nationalism

With the Pentagon hoarding minerals, China weaponizing rare earths, and Europe establishing strategic reserves, the world is entering a new era of resource nationalism. In this era, the definition of "store of value" is expanding. The importance of gold has not diminished, but it is facing competition from new strategic resources such as China’s rare earths, lithium, and cobalt. The long-term logic of Bitcoin's price is also being re-examined in this context.

Although 1 billion USD is just a drop in the bucket for the global resource market, its symbolic significance is profound. It marks a shift in thinking for the U.S. government from "market omnipotence" to "strategic reserves," and it foreshadows that competition for resources will become more intense in the coming years. For investors, this means a need to reassess their portfolios: simply holding financial assets may not be sufficient, and a combination of strategic mineral-related stocks, gold, and Bitcoin may be more robust.

If the negotiations on China's rare earths make progress, Bitcoin prices may see a strong rebound, as the alleviation of worst-case scenarios would boost risk appetite. However, if the situation continues to deteriorate, Bitcoin prices may continue to be under pressure in the short term until the market finds a new equilibrium. Regardless, this game surrounding China's rare earths and strategic resources has become a core variable affecting Bitcoin prices and the pricing of all assets.