Dear Subscriber,

By Marija Matic

In a significant development for the cryptocurrency industry, President Trump announced plans on Sunday to establish a national "Crypto Strategic Reserve" that will include not just Bitcoin (BTC, “A”), but also Ethereum (ETH, “B+”), XRP ( XRP, “B-”), Solana (SOL, “B”) and Cardano (ADA, “B+”).

This announcement immediately triggered substantial price surges across these digital assets.

"We will elevate this critical industry after years of corrupt attacks," Trump declared on Truth Social, adding that he has directed his administration to "move forward on a Crypto Strategic Reserve."

Source: Truth Social. Click here to see full-sized image.

In a follow-up post, he emphasized that Bitcoin and Ethereum would serve as "the heart of the Reserve," expressing his affinity for the two leading cryptocurrencies.

The announcement comes just days before the administration will host its first-ever White House Crypto Summit on Friday, an unprecedented gathering of industry leaders and government officials.

Trump has pledged to make the United States "the Crypto Capital of the World," signaling a dramatic shift in federal policy toward digital assets.

A Patriotic Approach to Crypto Selection

The market was taken by surprise to see multiple digital assets beyond Bitcoin included in the reserve.

The selection reflects a distinctly patriotic stance, as XRP, ADA and SOL are the “American cryptocurrencies” with the highest market capitalization.

In short, this approach favors crypto projects led by American teams, over other considerations.

While the announcement named specific cryptocurrencies, the president's Working Group on Digital Assets would still likely need to develop formal criteria for assets to be included in the reserves. These criteria would need to balance factors such as technological innovation, market capitalization, security features, adoption and compliance.

This should be crucial in determining the final composition and weighting of the crypto reserve portfolio.

Apart from the surprising addition of altcoins, Trump’s announcement carried another key element: This is the first time he has specified his support for a crypto "reserve" rather than a "stockpile."

While the former assumes actively buying crypto in regular installments, a stockpile might mean simply not selling any of the crypto currently seized and held by the U.S. government.

During his 2024 campaign, Trump vowed to streamline regulations, support a stablecoin framework and establish a Bitcoin stockpile.

The shift to a "reserve" strategy potentially signals a more aggressive approach to accumulating digital assets.

In response, the market’s reaction was swift and dramatic. The total cryptocurrency market capitalization increased by approximately $320 billion after the announcement, according to data from CoinGecko.

Bitcoin surged to $94,261, while Ethereum rose to $2,542 before consolidating.

Price of BTC over the past 7 days. Note the steep spike on March 2, following President Trump’s post on Truth Social. Source: Coingecko. Click here to see full-sized image.

Other specified reserve cryptocurrencies saw even more dramatic gains, with XRP jumping 31%, Solana 27% and ADA soaring 76% before profit-taking pulled prices back from their peaks.

Swift Action Following Campaign Support

The cryptocurrency industry strongly backed Trump during his 2024 election campaign, and he swiftly started delivering on his promises to the sector. Indeed,  it seems that he might even go beyond them.

His announcement of the Crypto Strategic Reserve is timed just days before Friday's inaugural White House Crypto Summit — a historic first such event.

The gathering will convene industry leaders and the president's Working Group on Digital Assets under the leadership of AI and crypto czar David Sacks and executive director Bo Hines.

This builds on Trump's January executive order establishing the cross-agency working group.

Already, the administration has demonstrated its pro-crypto stance by directing the SEC to withdraw investigations into several crypto companies and drop its lawsuit against Coinbase, America's largest cryptocurrency exchange.

Critical Questions for the Summit

Two critical questions remain for Friday's White House Crypto Summit:

First question: What legal authority is required to establish the reserves? 

The second is what their funding mechanism will be.

When it comes to the first, analysts and legal experts are divided on whether congressional approval will be necessary.

But that’s not my area of expertise. So, I’ll focus on the second question, and several speculations have emerged:

1. Seized Assets Conversion: Trump's team has already begun to explore an option of creating a stockpile using cryptocurrencies thus far seized in law enforcement actions — a method that likely wouldn't require congressional approval.

   However, this would function more as a static stockpile than reserves. Technically, the government could even liquidate a percentage of seized Bitcoin and Ethereum to diversify into other cryptocurrencies.

2. Exchange Stabilization Fund: Some suggest utilizing the Treasury's Exchange Stabilization Fund (ESF), which grants the Treasury Secretary broad powers to purchase foreign currencies with presidential approval. Apparently, there is a chance this oft-overlooked mechanism could potentially be extended to cryptocurrencies.
    
3. Gold Reserve Reallocation: More unprecedented and bold proposals include selling portions of existing gold reserves to fund cryptocurrency acquisitions or repurposing and converting already-held digital assets first while developing a long-term accumulation strategy.

Investors will be watching the White House Crypto Summit closely for clarity on which approach the government will take as the administration begins translating its announcement into a concrete plan.

In other words, the speculations and questions are many, but the answers are coming soon.

Until then, we can expect a volatile market driven by speculation and rumors.

Beyond Market Impact: The Global Significance

When it comes to impact on cryptocurrency prices, the symbolic value of a U.S. reserve would likely outweigh its actual size.

That said, we don't yet know the planned scale of this initiative. But even if insufficient to directly move markets, the initiative would signal something far more valuable: America's deepening commitment to digital assets.

Perhaps most significantly, it could trigger a global domino effect and prompt other nations to establish their own cryptocurrency reserves.

This would amplify the market impact far beyond America's initial investment.

Best,

Marija Matić