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Donald Trump touted himself as a pro-crypto President and promised to make the US the crypto capital of the planet if he won the 2024 election. He mooted the idea of a Bitcoin strategic reserve during the Presidential run in and while crypto policies have seemingly taken a back seat to foreign policy, and especially tariffs, there has been some discussion of what form a Bitcoin reserve could take, as well as its potential impact on crypto users.
The State Of Cryptocurrency
Cryptocurrency has been thrust further into the spotlight in the past year, following President Trump’s run for the White House. It is now accepted by thousands of businesses around the world and is especially popular at e-commerce sites and in crypto casinos. Its popularity has been spurred on by reduced transaction fees and processing times, as well as the anonymity and privacy offered by coins like Bitcoin.
For years, sections of the crypto industry have been calling out for institutional and even governmental investment into Bitcoin and, since November last year, the likelihood of that finally occurring has increased significantly.
What Is A Bitcoin Strategic Reserve?
President Trump has floated the idea of forming a Bitcoin strategic reserve. A strategic reserve is a portfolio of an asset or commodity that is held back from general use. Initially, this reserve would include Bitcoins and other digital assets that the US government already holds: assets that have been seized from criminal organizations and during criminal investigations.
Trump’s crypto czar, David Sacks, has said that the US government has, to date, sold off nearly 200,000 Bitcoins that were obtained in this way. The sales raised around $366 million but Sacks pointed to the fact that these coins would now be worth around $17 billion, meaning that the government has lost out on more than $16 billion.
What Form The Order Will Take
Following the signing of an executive order by Trump, there will be no further sell-offs. All currently held coins, and any that are seized in the future, will be retained by the government as part of its strategic reserve.
Immediately following the executive order, Bitcoin’s price saw a slight recovery, but it soon fell back. On the face of it, the strategic reserve is good news for crypto holders. However, the market was expecting more. As it stands, the government may not be buying any additional cryptocurrencies. It will hold on to those it seizes, but because it isn’t buying any new Bitcoins, it won’t see any major influx of money into the market.
However, while the short-term outlook suggests little change for the cryptocurrency market, the executive order demanded a “full accounting” of the government’s current cryptocurrency holding, and Trump did name-drop a handful of currencies that he said would form part of the government’s strategy in the future.
Coins Affected
The coins Trump mentioned were Bitcoin, Ether, XRP, Solana, and Cardano. There’s very little surprise in the coins he chose to list.
- Bitcoin is the world’s largest crypto and is the most commonly discussed and widely traded.
- Ether is the largest altcoin and is often cited as being the largest utility coin.
- XRP is the native coin of the Ripple network, and Ripple is touted as potentially being a bridge between traditional payment solutions and blockchain.
- Solana and Cardano are the next biggest cryptos by market capitalization, ignoring stablecoins and Binance’s native coin.
Although some may have expected Doge to be listed, considering Elon Musk is its biggest proponent and seemingly has a direct line to Trump’s policies, its lack of utility and high levels of volatility mean that was never likely.
Backtracking On Alt Coins
It is worth noting that while Trump listed several coins, an official has since stated that Trump was only mentioning examples of coins that could form part of the reserve. And, several key figures from within crypto have stated that a reserve would likely only hold Bitcoin, for now, at least.
Buy The Rumor
Trump is still clearly considering the purchase of additional coins as part of his strategic reserve plan. If this happens, investors may expect the prices of the cryptocurrencies mentioned to increase. However, it is worth remembering the old investing adage: “Buy the rumor, sell the news”.
When it looked likely that Trump would win the election and when he touted the idea of a strategic reserve, Bitcoin prices rose to historically high levels. The market bought the rumor, which means that the impending strategic reserve is already built into crypto’s prices. If the strategic reserve comes to pass, it is unlikely to cause any significant increases.
Sell The News
On the other hand, if the reserve does not come to fruition, or if it doesn’t take the form investors are hoping, it could well lead to price decreases. And, considering Trump’s crypto czar and financial teams will be considering this as well, it makes it difficult to predict exactly what will become of the project.
Bitcoin Strategic Reserve
While the formation of a Bitcoin strategic reserve may not lead to the kind of price rises people were hoping, it should bring greater credence to cryptocurrencies. After all, if the world’s largest economy is investing in Bitcoin, it really can’t be that bad, can it? This will likely see other countries scrambling to follow the US’s lead.
Businesses that had previously resisted the crypto urge will be more likely to find ways of accepting cryptocurrency. This means that crypto may become a more viable currency and the alternative to traditional currencies that it has been touted as.
Reviewed and edited by Albert Fang.
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Article Title: How Will The US’s Planned Bitcoin Reserve Impact Your Crypto Savings?
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