the official US crypto strategic reserve is coming

Yesterday, Donald Trump on his official account on Truth announced his new executive order inviting the presidential Working Group on crypto to move forward with the establishment of a strategic cryptocurrency reserve for the USA.

Technically, it does not yet mean that such a strategic reserve has been established, but it means that the president of the USA wants it to be created. 

In fact, the crypto markets have reacted very well. 

Trump announces the strategic reserve for the USA: the reaction of the crypto markets

At first, Trump had said that this reserve should also include XRP (Ripple), SOL (Solana), and ADA (Cardano), and later he added that obviously the first two cryptocurrencies to be included are BTC (Bitcoin) and ETH (Ethereum).

In the last 24 hours, the price of Bitcoin has risen by 7%, climbing well above $90,000. Last week, however, due to continuous declines, it had fallen below $83,000.

These figures are still well above those prior to Trump’s election, when they hovered around $70,000, although they are well below the all-time high of $109,000 reached in January. 

The other cryptos directly mentioned by Trump have also gained. 

The +50% in less than 24 hours of Cardano stands out, but it should be noted that ADA is still even at -68% from the highs. Furthermore, in December it had surpassed $1.2, only to plummet below $0.7 last week, and for now, it has barely managed to recover the $1 mark.

XRP instead in the last 24 hours has recorded a good +17%, which brought it back to -30% from the all-time highs. The cryptocurrency of Ripple is perhaps the one that has benefited the most from Trump’s electoral victory in November, among the top 10, so much so that its current $2.6 is not far from the $3.3 of mid-January.

Solana (SOL) has also recovered well, with a +12% in the last 24 hours, bringing it back to -45% from the highs. 

The problem with Solana at the moment is structural, because the enormous growth of recent months, with the all-time high reached in January, was due to a mini-bubble on memecoin, and this mini-bubble has now burst. However, it cannot be ruled out that others may form in the future.

The problem remains Ethereum.

As BTC in the last 214 hours has recorded a +7%, which however was not even enough to recover the 2,500$ mark. 

It is still at -51% from the all-time highs of 2021, and it is still far from the peak of $4,100 reached last year. The price trend of ETH continues to appear to be struggling, even if the inclusion in the USA’s strategic reserve could represent a turning point from this perspective. 

The USA strategic reserve: which cryptos are included

A few weeks ago, Donald Trump assigned the presidential Working Group on crypto, chaired by the crypto czar David Sacks, to evaluate the feasibility of establishing a strategic reserve in Bitcoin and cryptocurrencies.

As for Bitcoin, there do not seem to be any major problems. 

In fact, the USA State, through its Department of Justice, already owns almost 200,000 BTC (more than 18 billion dollars), obtained through various seizures in the context of different judicial cases. 

Therefore, it should not be particularly difficult to establish a strategic reserve in Bitcoin by simply placing those BTC that are already in their possession. 

The discussion, however, becomes a bit more complicated for the other crypto. 

Although the Department of Justice very likely also possesses other cryptocurrencies seized in more or less the same way, it is not certain that they are sufficient to establish a strategic reserve in cryptocurrencies with well-distributed weights. The risk is having to create one composed almost exclusively of Bitcoin, with only traces of other crypto. 

The debated issue is whether the USA should, and can, invest money to purchase more crypto in the markets to balance the weights within the strategic reserve. 

For example, if it were composed only of BTC, ETH, XRP, SOL, and ADA, taking as a reference their respective market capitalizations, it should be composed of 77% BTC and 12% ETH. This would mean having almost three billion dollars in Ethereum within the reserve, should all 18 billion dollars in BTC already in their possession be included. 

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The reasons of Trump

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President Trump has stated that a reserve of cryptocurrencies in the United States will elevate this critical sector after years of attacks by the Biden administration. 

He also added that his executive order instructs the presidential working group to proceed with the strategic reserve of cryptocurrencies. 

He wrote: 

“I will ensure that the United States is the world capital of cryptocurrencies”.

The key point seems to be precisely the latter. 

In other words, the ultimate goal does not actually seem to be to equip the USA with a strategic reserve in cryptocurrencies, but to do everything possible so that the USA dominates the crypto markets unchallenged. 

It is noteworthy that, as Alex Xu of Mint Ventures points out, Ripple, Solana, and Cardano have provided Trump with a lot of sponsorships for his election campaign, and this could end up weakening the seriousness of the strategic reserve in Bitcoin, also because it will further reduce the chances that the bill on the crypto reserve will be approved at the federal level. 

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Bitcoin vs altcoin

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The main issue seems to be whether or not to include altcoins within a national public strategic reserve. 

The inclusion of Bitcoin does not seem to produce any significant obstacle. 

The inclusion of crypto such as Solana, or XRP, which are certainly not as decentralized as BTC, or ETH, raises several questions. It should not be forgotten that just under half of all existing XRP are still in the hands of Ripple, a private company that could sell them at any moment. 

Furthermore, there are those who believe that it is very unlikely that the USA will end up spending money to purchase altcoins to include in this reserve, and that therefore it risks ending up being a reserve composed almost exclusively of BTC, as far as the equivalent value in dollars is concerned.