Topline
On Sunday, President Donald Trump announced that the U.S. plans to establish a “crypto strategic reserve” that will feature prominent cryptocurrencies such as bitcoin and ethereum, leading to a surge in crypto prices. This move marks Trump’s latest attempt to engage with the cryptocurrency sector, having positioned himself as a significant supporter of crypto in recent months.
President Donald Trump speaks with reporters prior to boarding Marine One on the South Lawn of the … [+]
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Key Facts
Trump stated that a national crypto reserve would “elevate this critical industry after years of corrupt attacks,” and he has instructed his administration to “advance the Crypto Strategic Reserve,” which will encompass cryptocurrencies like XRP, Solana, and ADA.
In a follow-up post, he asserted that the reserve would “obviously” include bitcoin and ethereum as the “heart of the Reserve,” expressing his affection for the two leading cryptocurrencies.
This announcement builds upon an executive order Trump issued on January 23, which directed his administration to form a “working group” to propose a regulatory framework for digital assets, including the consideration of a “national digital asset stockpile.”
What Was The Impact On Crypto Prices?
Following Trump’s announcement, bitcoin surged over 10%, climbing from approximately $94,000 to more than $94,000 early Sunday afternoon. At the same time, ethereum experienced a more than 13% increase, briefly exceeding $2,500 earlier in the afternoon. Smaller market cap coins mentioned by Trump—XRP, ADA, and Solana—also saw their prices skyrocket by at least 20% shortly after the announcement.
What Would A ‘Crypto Strategic Reserve’ Look Like?
The specifics of the proposed crypto stockpile remain uncertain, but Trump’s executive order indicates that the reserve may be “potentially derived” from cryptocurrency seized by federal authorities “through law enforcement efforts.” According to the New York Times, the federal government currently holds an estimated $19 billion in seized bitcoin, which it could retain to establish a reserve. The Washington Post notes that the government has previously sold off its crypto assets, resulting in a drop in crypto prices. Retaining that cryptocurrency in a stockpile could prevent similar downturns. It remains to be seen if Trump will seek to acquire substantial amounts of new cryptocurrency to bolster the reserves, which could stimulate the crypto market and benefit existing holders, but would likely need congressional approval, as the Times suggests.
Chief Critic
While the cryptocurrency community has welcomed the idea of a national stockpile, some economists have raised concerns about the initiative. They argue that the government’s foray into cryptocurrency could be a risky move, mainly advancing the interests of current crypto holders and risking the loss of billions in taxpayer money should the market decline. “There’s just no discernible logic to do it,” remarked Mark Zandi, chief economist at Moody’s Analytics, in a November statement about a national stockpile. “I understand why crypto investors would support it. Beyond that, I don’t see the added value, especially if taxpayers have to bear the costs.”
Why Do Crypto Advocates Want A Stockpile?
Proponents of cryptocurrency argue that a national stockpile could bolster the industry by facilitating government purchases of crypto and averting potential losses from government sell-offs. They believe that it could also aid in reducing the national debt by increasing federal revenue as the value of the government’s crypto investments rises. In July, Sen. Cynthia Loomis, R-Wyo., introduced legislation to set up a national bitcoin stockpile, advocating for cryptocurrency as a government “savings technology” and a means to “improve America’s balance sheet,” asserting the initiative would “halve the national debt.”
Tangent
Interestingly, one cryptocurrency not mentioned in Trump’s announcement is tether, which is pegged to the U.S. dollar. However, the Post reports that seized cryptocurrencies available for a stockpile may include this stablecoin. This is significant because Trump’s Commerce Secretary Howard Lutnick has connections to tether, with reports suggesting that Cantor Fitzgerald, which Lutnick previously led, plays a role in managing tether’s portfolio and has recently secured a deal that could lead to a 5% ownership stake in tether. Although Lutnick has resigned from Cantor Fitzgerald and committed to divesting from it due to his government role, his ties to tether have drawn scrutiny, with Sen. Elizabeth Warren, D-Mass., expressing “serious concerns” about his involvement and its potential implications for policies related to tether and the cryptocurrency sector. The White House and Commerce Department have not yet responded to inquiries regarding Lutnick’s involvement with the Crypto Strategic Reserve.
Key Background
Trump has emerged as a prominent advocate for the crypto sector leading up to the November election, garnering significant fundraising support from notable figures in the crypto world. He introduced a series of favorable proposals, including addressing stringent regulations, advocating for all bitcoin production to occur in the U.S., and promoting lower interest rates. During his appearance at the Bitcoin Conference in July, he even committed to establishing a national crypto stockpile, asserting, “For too long our government has disregarded the cardinal rule that every bitcoiner knows by heart: Never sell your bitcoin.” Trump has also independently entered the cryptocurrency market, launching his own $TRUMP meme coin around his inauguration. His recent announcement regarding the national stockpile continues a series of initiatives aimed at the crypto industry, including creating a “Special Advisor for AI and Crypto” position, filled by former PayPal COO David Sacks, reversing Biden-era crypto guidelines, establishing a task force to develop regulations for the crypto market, and appointing well-known crypto supporter Paul Atkins to lead the Securities and Exchange Commission.
Further Reading
A First-Day Trump Order: A Federal Stockpile of Bitcoin? (New York Times)
Trump Bullishness Pushes Bitcoin To 4-Week High—As Crypto Experts Push For Stockpile On Day One (New York Times)
