Will Trump’s digital asset reserve reshape the crypto landscape?
The announcement of a strategic reserve for Bitcoin and other currencies is fueling debate over its role in stabilizing or disrupting the market.
United States President Donald Trump announced on Sunday that five digital assets will be kept in a kind of national strategic reserve by the world's largest economy: Bitcoin, Ether, Solana, Ripple, and Cardano. Trump made the announcement on his social media platform, Truth Social.
A strategic reserve is a stockpile of critical resources that can be released in times of crisis or supply disruptions. The United States currently has a strategic oil reserve, the world's largest emergency reserve of crude oil. However, Trump’s announcement lacked a detailed explanation of the planned reserve, other than an explicit mention of the digital currencies that are expected to be included. This was notable because up until now, only Bitcoin had been considered for a strategic reserve. Currently, the U.S. holds approximately 200,000 Bitcoins, worth about $20 billion.
The possibility that the U.S. might hold cryptocurrencies—whether seized by the government in criminal investigations or purchased outright—led to a sharp rally in the currencies. Following Trump’s announcement, Bitcoin rose 20%, reaching a value of $95,000, Ether jumped 14% to $2,520 (though it later retreated to $2,335), Cardano (ADA) surged 56% to $1.05, Ripple (XRP) rose 30%, and Solana (SOL) increased by 20%. Within hours of Trump’s announcement, the crypto market added approximately half a trillion dollars to its value, though it later corrected to an increase of around $300 billion.
Trump’s announcement was well-timed, coming at a moment when the market needed a boost. On February 25, Bitcoin ETFs set new negative outflow records, with investors pulling over $1 billion from 11 different ETFs. The price of Bitcoin had fallen more than 25% to below $80,000 since its peak on January 20, and a 12% drop last week marked the steepest three-day decline since the FTX collapse in November 2022.
A J.P. Morgan report published last week noted that the crypto market is suffering from a severe lack of liquidity and needs new government intervention and initiatives to continue supporting it. The report pointed out that the total crypto market value, which peaked at $3.72 trillion in December 2024, had fallen by 15% to $3.17 trillion. The bank claimed that this decline signals a loss of investor confidence. "As we argued in our last publication, the new U.S. administration's crypto initiatives are expected in the second half of the year. Until then, weakening demand poses a negative risk to crypto markets," the bank stated, warning that without further action, crypto markets could face additional downward pressure in the near term.
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From left: Brad Garlinghouse, Charles Hoskinson, and David Sachs
(Photos: AFP ,Reuters, Bloomberg)
Nothing is a coincidence
Apart from Bitcoin and Ether—two dominant currencies in the market—the choice of Solana, Cardano, and Ripple is more unusual but certainly not random. These selections are tied to several market figures who have garnered Trump’s attention due to their strong support for his election campaign and inauguration.
David Sacks, appointed by Trump as the administration’s crypto czar and expected to chair a groundbreaking crypto conference at the White House on Friday, is deeply involved in the Solana project, which is backed by venture capital firm Andreessen Horowitz. Sacks, an early Trump supporter, hosted a fundraiser at his San Francisco mansion in June with tickets costing as much as $300,000. The event reportedly raised more than $12 million. Sacks also has close ties to Elon Musk and supported Musk’s Twitter acquisition. According to reports, Sacks was a key force behind Trump’s selection of J.D. Vance as his running mate.
The potential conflict of interest between Trump, Solana, and Sacks sparked criticism, with Sacks announcing on social media that he had sold all his holdings in Bitcoin, Ether, and Solana. However, he did not mention the holdings of his investment firm, Craft Ventures. In December, Sacks claimed his investment in Solana had brought his firm about $1 billion in profit. Both Sacks and Andreessen Horowitz have invested millions in Trump’s campaign.
More than the maximum
The choice of Ripple is even more unusual. While the currency is popular, the company behind it is controversial. The company’s currency is highly centralized, with the issuing company owning more than 50% of the total supply. Therefore, the surge in Ripple following Trump’s announcement clearly benefits the company. Trump, who was aware of this, even shared an industry press article about the rally on Truth Social.
Ripple donated $45 million to a lobbying group supporting pro-crypto politicians and another $5 million to Trump’s inauguration fund—an amount significantly higher than the official maximum contribution of $1 million. The company’s CEO, Brad Garlinghouse, even dined with Trump last January.
Charles Hoskinson, the founder of Cardano, has also hinted for months that he expects to collaborate with the Trump administration, though no clear sign of that has emerged. The choice of Cardano suggests that his efforts may have yielded some success.
Questions remain
Despite the enthusiasm, Trump’s announcement has raised several questions. First, how will the reserve function? There is currently one bill on the subject, introduced by industry-friendly Republican Senator Cynthia Loomis, who personally owns five Bitcoins. In July, she proposed that the Treasury Department purchase 200,000 Bitcoins annually for five years, eventually amassing a stockpile of one million coins—about 5% of the entire global supply of Bitcoin. Under the proposal, the Treasury would finance these purchases with profits from Federal Reserve deposits and gold holdings.
Second, there’s the issue of decentralization. The crypto market was designed to be decentralized, and government intervention represents one of the largest compromises the market has seen. Finally, the political question: Trump, portrayed as an enthusiastic promoter of crypto, is making these moves while relying on personal connections to key figures in the industry. Does this move truly serve the national economic interest, or is it a reward for political cronies and supporters?
