US Crypto Reserve
Thoughts on Trump's Federal Crypto Reserve
Comment:
This post was released on 6th March 2025. A few hours after this post was released David Sacks announced an executive order had been signed to create a Strategic Bitcoin Reserve just for Bitcoin, and a Digital Assets Stockpile for other crypto assets. This lines up with my separation between assets that I outlined below and an SWF is still entirely possible.
TLDR:
Trump made a couple of posts about a US Crypto Reserve that mentioned BTC, ETH, XRP, SOL and ADA, although it’s not clear how this would work yet.
Strategic reserves are generally made with the intention of providing security and stability, the US has a gold reserve so a BTC (ie. digital gold) reserve makes sense.
Sovereign wealth funds are made with a long-term view of investing the country’s money for future generations, certain other cryptos could make sense here.
The US government’s decision on how to differentiate between cryptos is still not clear, but they have some great economists and crypto-friendlies figuring it out.
Trump’s policies have been generating a lot of uncertaianty in the market. This past Sunday he made a post about a US Crypto Strategic Reserve and the crypto market perked up massively for a bit before dopping back down.
Regardless of the announcement’s short-term impact on the market, the US establishing a Crypto Strategic Reserve would be very meaningful for the space in the long-term, and the assets it decides to hold will also be a big deal. So today I decided to analyse this further.
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US Crypto Reserve
Trump seems to be doing his best to keep everyone on their toes. His geopolitical and economic policies have generated a lot of uncertainty in traditional markets, and consequently we’ve seen a general down trend in crypto markets recently.
However, when he made a post about a US Crypto Strategic Reserve on his social network Truth Social on Sunday 2nd March, things perked up massively, even if only for 24 hours before dopping back down!
He made a slight blunder not mentioning Bitcoin (BTC) and Ethereum (ETH) in his first post and had to fix it in a second post where he mentioned them together with Ripple (XRP), Solana (SOL), and Cardano (ADA).
Now at a quick glance it’s super exciting to see the president of the richest and most powerful nation in the world posting positive things about crypto, and suggesting that the US will begin to hold these assets that we in crypto have been holding for years.
However there’s nuance here, what does he mean by a US Crypto Reserve? Does he mean a “Strategic Reserve”? Or will the crypto’s be held in something else?
To answer that we need to start with what a “Strategic Reserve” actually is.
What’s a Strategic Reserve
Strategic reserves are generally used for government stockpiles of critical resources or assets to ensure stability, security, or self-sufficiency during emergencies/crises, or market disruptions.
They are designed to address immediate or short-term needs, such as economic shocks, supply chain disruptions, or geopolitical instability.
Common examples are physical goods like oil, food, medical supplies, or important financial assets like cash and gold.
If you believe that Bitcoin is comparable to digital gold, which is the way most people in crypto see BTC, then it makes plenty of sense to have a strategic Bitcoin reserve.
However, this doesn’t necessarily extend out to altcoins like Ethereum and Solana. Even Peter Schiff, who notoriously hates on Bitcoin and has been speaking badly about it since 2011, mentioned this in an X post after Trump’s post.
Strategic reserves are not for buying up company stocks, so why should they be used to buy up altcoins that don’t have strategic importance?
Indeed, most would agree that it doesn’t make much sense to do this with a strategic reserve.
However, it might make sense to do this with a Sovereign Wealth Fund (SWF), which Trump’s administration also recently announced back on February 3rd.
Trump signed an executive order to make the very first Sovereign Wealth Fund in US history, but what is an SWF?
What’s a Sovereign Wealth Fund
A sovereign wealth fund is a government owned investment fund that manages a country’s surplus wealth (ie. what’s left over after expenses), to achieve long-term financial goals.
You can imagine that if the government is fiscally intelligent and finds themselves with additional money in their coffers at the end of the year, they can put it to work to generate wealth for the country for future generations.
Two of the largest and most famous SWF’s are those from Norway and the UAE, two countries that have huge oil supplies with relatively small populations, and therefore they generate excess revenue that can be intelligently invested.
You can see a list of the top 10 SWFs below, it’s no surprise that most are oil rich countries.
You’ll notice China has two of the largest SWFs, it isn’t oil rich but since it’s a centrally managed authoritarian government with a huge trade surplus, it can act fast (as it’s authoritarian) and use all that excess trade revenue to fuel their SWFs.
Undoubtedly when the US makes an entry into the SWF game they’ll become one of the largest and most important ones too.
The big difference between a strategic reserve and a sovereign wealth fund is in their time horizons and their goals. While strategic reserves are there to be deployed as necessary in specific moments like in a crises, an SWF is intended to be run like a government owned investment fund generating long-term returns.
Below’s a simple table differentiating the two.
So considering Trump’s administration is discussing a “Crypto Reserve”, here’s what I think is actually most likely to happen…
Which Crypto’s belong where?
Bitcoin (BTC) by now is simply acknowledged and accepted as the most important cryptocurrency in the entire space. Its market capitalisation represents over 60% of the entire space and as I said earlier it’s often viewed as digital gold.
Although projects like Ethereum (ETH) and Solana (SOL) are sufficiently decentralised at this point, and have become important networks and assets in the space, they do not represent the same type of thing as Bitcoin.
ETH and SOL are somewhere between digital commodities and shares in a network. The asset is closer to a commodity than a share, however these networks ultimately still compete with each other for users and apps, and could one day be entirely superceeded by competition and therefore lose value just like a company share can.
Meanwhile with Ripple (XRP) and Cardano (ADA) they have even less solid arguments, sure they are among the most valuable cryptocurrencies out there by market-capitalisation since they both have a large holder-base, but these networks are neither as decentralised nor as widely used as Ethereum and Solana.
My guess then is that when Trump’s administration eventually does announce their strategy for the “Crypto Reserve”, I think that they’ll likely buy up Bitcoin for a Strategic Reserve and buy up select crypto assets for their Sovereign Wealth Fund.
The task of figuring this out has fallen largely onto the administration’s “Crypto Czar” David Sacks who’s made it clear that the SEC was previously treating crypto companies poorly, and that he’s going to make sure this administration has a much more crypto-friendly approach.
David Sacks is surrounded with very knowledgeable people about crypto and should get some good counsel to make the best decisions. Also Scott Bessent the Treasury Secretary and Howard Lutnick the Commerce Secretary are likely to be responsible for an eventual Strategic Reserve and SWF, and are both fans of crypto.
And what about other major crypto assets like Binance’s BNB token?
Well it doesn’t fit into Trump’s “America First” narrative of supporting American crypto projects, so we’re unlikely to see Trump’s administration holding, and the same goes with any other crypto asset that’s not been made by people in the US.
Bullish Tailwinds for Crypto
All of this is still speculative for now and we still have some time before any firm decision gets made on any sort of US Crypto Reserve. Trump gave David Sacks 180 days from when he signed the executive order, setting the deadline to July 22nd.
The most important thing to pause and reflect on though is just how much of a different environment the crypto industry now lives in.
In the previous administration we had constant fear in the market as the SEC under Gary Gensler would be constantly going after all sorts of crypto companies.
However, under Trump’s administration we’ve seen a full 180 degree u-turn, and incredibly the conversation we’re having now are about whether the government is looking to include *too many* coins in their crypto reserve!
The SEC has dropped their ongoing lawsuits against companies like Coinbase, Kraken and Consensys, and has even recently announced that they don’t see memecoins as securities but rather as collectibles!
I’ve been in crypto for almost a decade now and I’ve seen so much FUD (fear, uncertainty, doubt) over the years in the space. There’s been a running theme for as long as I can remember that some day governments would try to shut down crypto.
What a long way we’ve come since then!
And its not just the USA, governments around the world are beginning to really embrace crypto. Ranging from the UK wanting to be a crypto-hub, small countries like El Salvador and Bhutan mining Bitcoin, and the UAE now buying up BTC ETFs through their own sovereign wealth fund.
There’s honestly never been a more bullish time for crypto than now. There’ll be bumps along the road of course, but these sure are exciting times ahead!
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