President Donald Trump’s paired posts on his plan that “caused a market-wide rebound” with cryptocurrency on March 2, bringing global market capitalization to $3.04 trillion.
Still, in a thorough examination, along with the policy of the U.S. strategic oil reserves created in the 1970s after the Arab oil embargo, perhaps the crypto strategic reserves created after the Arab oil embargo, raise as many questions as it answers.
If not confusion, there was a controversy, if not confusion, about whether the US would purchase cryptography for the sanctuary, not just adding cryptography stocks that were confiscated when law enforcement had a seizure, but rather simply adding cryptography stocks that were confiscated.
The order of two Trump posts on the Truth Social Platform was also under scrutiny. Interestingly, in the first post only three smallest tokens for forecast reserves by market capitalization by XRP (XRP), Solana (SOL) and Cardano (ADA).
sauce: Donald Trump
A few minutes later, almost as an afterthought, the president posted again. This time we’ve referenced two biggest cryptocurrencies: Bitcoin (BTC) and Ether (ETH).
sauce: Donald Trump
Much or unfairly, some critics pointed out that the platform could have been more of a lineage, as the president’s own memocoin was launched in Solana.
Others in the crypto community were surprised to find the inclusion of altcoins. As BTC is the oldest, safest, most widely owned and most capital cryptocurrency, it was assuming that the US might have one day a Bitcoin strategic reserve. But also Altcoins’ sanctuaries?
“Unforced Error”
Anthony Picriano, founder and CEO of Professional Capital Management, wrote on March 3rd.
Crypto Tokens such as ETH, SOL, XRP, and ADA simply do not fit into the “reserve” framework, Pompliano added. They are more similar to technology stocks than hard money or natural products that normally live in strategic reserves (Canada has a strategic reserve of maple syrup, obviously a lesser product).
“Skeptics say the most obvious winner is Trump himself. Trump himself has deployed his own crypto venture, carrying millions of dollars tokens with tokens to be included in the spare,” the New York Times said, “The five XRP tokens that Trump said were donated $45 million to the industrial Weide Pac, which chose Trump.
Related: Do XRP, SOL, or ADA belong to US cryptographic protected areas?
However, these altcoins suggested that they better reflect the direction in which blockchain-based currencies are heading. For example, Cardano says that it is “more energy efficient, cost-effective, deterministic, decentralized, scalable and can handle programmatic nature” than Bitcoin.
Altcoins: “Double-edged sword”
Yu Xiong, professor and director of Surry Academy at Surry School of Surry Business, called for the state-supported reserve to include “double-edged swords” with supplements and weaknesses for Altcoins.
Multi-asset reserves make you more diverse and less dependent on Bitcoin. This accounts for about half of Crypto’s total market value today, he tells Cointelegraph, explaining further.
“Ethereum’s Defi Ecosystem (with a total value of $50 billion locked) and Solana’s high-speed transactions (65,000 TPS) represent technology diversity.”
Including Altcoins also recognizes a wider use case for blockchain. Ukraine has collected $135 million in crypto donations via ETH, SOL and other coins after being invaded by Russia in 2022.
However, there are also potential drawbacks, including regulatory uncertainty. For example, the SEC still has ongoing lawsuits against Ripple. “The government that holds these tokens can face a backlash,” Xiong said.
Liquidity risks are another concern. Given how thin these coins are traded, government purchases or sales could cause crypto prices to rise or crash.
Of course, BTC has a larger trading volume than other coins. In the last 24 hours, Bitcoin volume across all platforms has been $54.8 billion compared to ETH’s $23.4 billion, XRP’s $5.5 billion, Sol’s $5.4 billion, and ADA’s $3.6 billion.
Related: Why is the Ripple SEC case still going on in the ocean of solutions?
This can cause fear of market manipulation. “The US Treasury’s 2014 sales of 30,000 Silk Road BTC caused minimal disruption, but today a 3% (~$5.5 billion) sale of Bitcoin’s supply could crash 15% of the price.”
Will it benefit the crypto sector?
There is no doubt that US crypto sanctuaries will provide arm shots to the crypto and blockchain industry. Just like when BlackRock launched the Bitcoin ETF, the acceptance of the scheme accelerates and encourages adoption by traditional financial companies, just as when it launched the Bitcoin ETF, which attracted $18 billion in assets within six months.
It also helps to stabilize the market. In an era of extreme volatility, government reserves could serve as buffers as then-President Joe Biden was demonstrated in 2022 when the release of 180 million barrels of crude oil from the SPR to stabilize global energy prices. Oil prices skyrocketed after Russia’s invasion of Ukraine.
As Xiong told Cointelegraph:
“US reserves may reflect the role of strategic petroleum reserves in energy security and place cryptography as a geopolitical tool.”
However, state-backed strategic reserves are risky. The crypto market in particular remains vulnerable, Xiong continued. Bitcoin’s annual volatility, which often exceeds 100% before 2022, has bounced between 30% and 60% over the past year, while crude volatility is below 35%. Higher volatility raises concerns about manipulation or unintended market distortions, Xiong said.
Outside of encryption, there are also questions about fairness and price stability. How does the government hedge against cryptography volatility, the New York Times asked. Furthermore, “The prospect of taxpayer money being used for speculative investments has attracted real concerns.”
“This is certainly great for Bitcoin holders today, and it’s just as bad for taxpayers,” Cornell University economist Eswar Prasad told The Times.
When asked whether US crypto-protective sanctuaries are a game changer in the crypto and blockchain industry, Xiong told Cointelegraph that its importance is symbolic but “strategically important.”
US crypto-protected areas can provide “cover” to institutional investors, such as pension funds, for example. For example, you might be sitting on a fence when investing in cryptocurrency.
If it’s not a problem for the US government, it may be suitable for corporate finances and institutional investors. “The pension funds and insurance companies that manage $50 trillion worldwide are as seen after the Bitcoin ETF approval in early 2024, Xiong said.
Xiong was asked to summarise the impact on the crypto industry from these recent strategic preparation proposals, responding with “short-term optimism, long-term attention.”
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