President Trump said on social media Sunday that his administration is working toward creating a “crypto strategic reserve” that will include bitcoin and ethereum, along with lesser-known cryptocurrencies XRP, solana, and cardano. He later followed up with another post saying his planned reserve would also include bitcoin and ether, the two most popular cryptocurrencies.
The announcement helped crypto prices rebound after recent sell-offs, but only for a few hours. After rising to $90,000 Monday morning, bitcoin fell to roughly $87,000, or 7.3%, by Monday afternoon. Ethereum tumbled 14.6% to $2,153. Massive price spikes in XRP, solana and cardano also fizzled, dropping 12.1%, 13% and 12.3%, respectively.
Nic Puckrin, financial analyst, investor and co-founder of The Coin Bureau, said in a note that the cause of the temporary price boost was most likely a “combination of ‘hopium’ with a classic short squeeze,” adding that more concrete information on the crypto reserve plan is needed to reassure investors of its worth.
“While the crypto reserve announcement was a bullish catalyst for crypto prices in the short term, its long-term impact remains questionable. For one thing, no actual details have been disclosed yet,” Puckrin said.
That said, the creation of digital currency reserve is a milestone moment for bitcoin and blockchain technology.
“The launch of a U.S. crypto strategic reserve marks a pivotal moment for digital assets, reflecting a major step in the government’s engagement with the crypto industry,” said Federico Brokate, head of the U.S. business at 21Shares, in an analyst note. “This initiative not only reinforces Bitcoin’s role as a maturing store of value but also highlights the importance of blockchain networks like ethereum, solana, XRP and cardano in financial infrastructure, payments and decentralized finance.”
What is a crypto strategic reserve?
As described in the president’s executive order from January 23, the crypto strategic reserve would be a national stockpile of digital assets created under a federal regulatory framework developed by the newly established Presidential Working Group on Digital Asset Markets.
The working group will be chaired by high ranking officials, including the White House AI & crypto czar, the secretary of the Treasury and chairman of the Securities and Exchange Commission, among others.
On the campaign trail, Trump pledged support for a “strategic national bitcoin” stockpile, which would include bitcoin the U.S. government has previously seized in law enforcement actions. Sunday’s announcement was the first time he advocated for the government to hold other types of cryptocurrencies.
How the crypto strategic reserve would be structured and maintained is not yet clear, as the White House did not immediately provide additional details, including how much of each type of cryptocurrency Trump wants the U.S. to hold, and how the government would acquire them.
But more information could be revealed this week, as Trump has also recently announced he will speak at and host industry leaders on Friday at a White House “Crypto Summit.”
“The first White House Crypto Summit on Friday will be crucial to watch,” said Puckrin. “We will be waiting to see who will be there, what will be discussed, and whether any actual steps toward implementation are outlined. The key question is, how will they fund and legislate this reserve? Until we have some answers, there’s little substance to support this rally, and it could fizzle out as quickly as it started.”
What’s the point of a strategic crypto reserve?
Similar to the Strategic Petroleum Reserve, which protects the U.S. economy from disruptions in oil supplies, a national crypto reserve would help diversify government holdings and hedge against financial risks, according advocates of the plan.
Critics, however, say the volatility of cryptocurrencies makes them a poor choice as a reserve asset.
Potential hurdles
Creating a crypto strategic reserve is likely to require an act from Congress, just as with the Strategic Petroleum Reserve, which was created in December 1975 when then President Gerald Ford signed the Energy Policy and Conservation Act.
Also, the inclusion of cryptocurrencies other than bitcoin is likely to face sustained pushback among some corners of the heavily divided cryptocurrency industry. Bitcoin is the oldest and by far most popular cryptocurrency, and accounts for more than half of the world’s global crypto market cap.
The president has cast himself as hero to the crypto industry, which he said in his announcement had been the target of “years of corrupt attacks by the Biden administration.” The crypto industry felt unfairly targeted by the Biden administration and spent heavily to help Trump win election.
The first several weeks of his administration have seen several moves to boost crypto, including ending or pausing high-profile enforcement actions by the Securities and Exchange Commission.
Crypto prices soared after Trump’s victory last year, and when the price of bitcoin first crossed $100,000 in early December, Trump took credit and posted “YOU’RE WELCOME!!!” on social media.
But prices have fallen since Trump’s inauguration and Trump has faced criticism, including from allies within the crypto industry, for helping launch a personal meme coin just before he took office that has since collapsed in value.
The crash of meme coins linked to First Lady Melania Trump and Argentine President Javier Milei, along with a massive hack of a major cryptocurrency exchange that the FBI has said was undertaken by North Korea, have also dimmed enthusiasm for crypto.
