In a pretty random post on Sunday, Donald Trump announced that the U.S. is creating a “crypto strategic reserve.”
The president initially confirmed that XRP, SOL and ADA would be included — hastily adding a couple of hours later that BTC and ETH are going to be at the “heart” of this stockpile.
Crypto markets rallied on the news, with Bitcoin nearing $95,000 and Cardano smashing through $1 for the first time since 2022. But much of these gains have since been reversed, with stock markets tanking as new tariffs targeting Mexico and Canada came into force.
No further details about this reserve have been confirmed — there hasn’t even been an official statement from the White House. So: let’s take a look at some of the big questions that remain unanswered.
1. Will This Cost Taxpayers Money?
The Department of Government Efficiency, led by Elon Musk, is currently trying to slash billions of dollars in spending — all with a view to reducing the tax burden on everyday Americans. That makes this plan to start investing in a slew of altcoins even more unusual.
Trump’s plan for a strategic Bitcoin reserve made sense, as it wouldn’t have to cost taxpayers a dime. About 200,000 BTC has been seized from criminals in recent years — meaning that this could be used as a starting point for the reserve, instead of coins being auctioned off.
It’s highly likely that Republican and Democrats alike might take a dim view of their taxpayer dollars being used to snap up cryptocurrencies they’ve never heard of — especially should they make a substantial loss.
Any move to convert some of this seized BTC into ETH, XRP, SOL and ADA would inevitably spark an outcry.
According to The New York Times, there has been a suggestion that a new tax — which would serve as a levy on stablecoin transactions — could be used to generate investable funds.
2. Why XRP, SOL, and ADA?
You could argue that this reserve is meant to serve as a showcase for cryptocurrencies created in the US of A, but that theory falls flat when you consider that the Cardano Foundation is based in Switzerland.
Allegations are swirling that certain crypto companies, Ripple among them, have been lobbying hard for inclusion in a U.S. reserve — with Brad Garlinghouse warning against “Bitcoin maximalism.”
But critics are questioning how decentralized these altcoins really are, and claim they’re vastly inferior to Bitcoin.
3. What Will the Allocation Look Like?
This is a significant question — the answer to which could cause these five named cryptocurrencies to surge substantially or crash dramatically.
Perhaps the fairest way of doing this would be to determine the allocation based on each digital asset’s respective market cap.
At the time of writing, that would mean Bitcoin represents 77% of this crypto strategic reserve — with Ether on about 11.5%, XRP on 6.5%, SOL on 3.5%, and ADA on 1.5%.
4. What Other ‘Valuable Cryptocurrencies’ Will Be Included?
There would be little point adding stablecoins like USDC and USDT — they’re designed to be pegged to the dollar, so wouldn’t deliver much pricewise.
You could imagine there’s a great temptation to add Dogecoin, it inspired the name of an entire government department after all. And while you’d think the White House wouldn’t be so brazen to add $TRUMP to this reserve, nothing can be ruled out with an administration as unpredictable as this.
5. Will This Need Congressional Approval?
Very possibly — and while there is bipartisan support for clearer regulation, a reserve containing volatile altcoins might be a little too much for lawmakers to stomach. Professional Capital Management founder Anthony Pompliano had an interesting theory here, telling Fox Business:
“I wonder if Trump is actually trying to negotiate. If you go and think of the art of the deal, everything is negotiated. He’s asking for five or six assets — and as it works through the political process, he’s then willing to give up a bunch of them and end up with a Bitcoin-only reserve. I don’t know if that’s what he’s doing or not, but I sure hope so.”
6. Will Other Countries Follow Suit?
The consensus seems to be this: major economies will sit up and take notice if the U.S. is creating a reserve that includes Bitcoin.
However, many countries will probably end up giving these altcoins a wide berth.
The post 6 Unanswered Questions on Trump’s Crypto Reserve appeared first on Cryptonews.
