Donald Trump provoked a riot of cryptocurrency trading and accusations of favoritism on Sunday after identifying several coins that may feature in a future US strategic crypto reserve. Alongside bitcoin, Trump said that XRP, solana, cardano, and ether will be considered for inclusion.
“A U.S. Crypto Reserve will elevate this critical industry after years of corrupt attacks by the Biden Administration, which is why my Executive Order on Digital Assets directed the Presidential Working Group to move forward on a Crypto Strategic Reserve that includes XRP, SOL, and ADA,” wrote Trump in a Truth Social post on Sunday.
“And, obviously, BTC and ETH, as other valuable Cryptocurrencies, will be the heart of the Reserve. I also love Bitcoin and Ethereum!” he added two hours later, perhaps to appease the tribes he had forgotten to toast.
An executive order signed by Trump in January had already specified that cryptocurrencies other than bitcoin would be included in the reserve, but the president had not previously identified which coins were under consideration. (The administration has not yet confirmed how large the reserve will be or where coins will come from.)
Seizing upon this morsel of new information, crypto traders piled into the coins singled out by Trump, leading to a sharp but temporary bump in price ranging from 9 to 65 percent. The coins have mostly since returned to roughly the same price as before the announcement.
In crypto circles, meanwhile, the question became: Why had Trump chosen these particular coins? The case for a bitcoin reserve is predicated on the already shaky assumption that the ever-rising price of bitcoin will offset losses in spending power caused by inflation. But what makes these other coins—many of which have very volatile pricing—“strategic”?
The White House press office did not respond immediately to a request for comment.
Some members of the crypto industry, especially bitcoiners, suspect that Trump’s decision-making was colored by the sums of money thrown by particular crypto businesses at the 2024 US election.
In the run-up to the election, crypto businesses funneled more than $150 million into super political action committees set up to support pro-crypto congressional candidates, many of them Republican. Among the most generous donors were cross-border payments company Ripple, whose services rely on XRP, venture capital firm a16z, which has previously invested in Solana, and software company Consensys, run by one of the Ethereum cofounders.
“In the end, I believe the government will come to understand that it makes no sense to include one company’s token over another in a strategic reserve. Only bitcoin has no company to oversee it and is above the bar to be evaluated as a strategic asset,” says Cory Klippsten, founder of bitcoin-only trading platform Swan Bitcoin. “If politicians absolutely must pay back the favors from the last election cycle to their crypto industry donors, perhaps they can add altcoins to a sovereign wealth fund.”
If the US government were to purchase large quantities of the coins to populate the reserve, the price of each is likely to rise. In that regard, their inclusion in the stockpile “looks very much like a government subsidy,” says Patrick Hillmann, former chief strategy officer at crypto exchange Binance. But the preferential treatment is warranted, he argues, in light of the hostile treatment of US crypto businesses by regulators under the Joe Biden administration.
“These [crypto projects] that represent the very core of the American Web3 industry have been held back by all of this litigation and regulatory action—and they’ve fallen behind,” says Hillmann. “The best thing you can do is send a signal to the global marketplace that the US government is embracing these [projects] … It’s the smart play if the administration wants to give the US crypto community a head start.”
Another justification for incorporating these particular cryptocurrencies into the reserve might have something to do with stablecoins, proposes Chris Perkins, managing partner at crypto VC firm CoinFund. Pegged to a dollar valuation by an underlying basket of assets, stablecoins are pitched as a cheaper and faster way to make dollar-denominated payments. Those payments take place on top of crypto networks like Ethereum and Solana, among others.
If stablecoins become as ubiquitous as crypto proponents predict, claims Perkins, it would make sense to hold in reserve the assets required to pay the transaction fees for stablecoin transfers, known in crypto jargon as gas fees. That might explain the proposed inclusion of Solana and Ether in the reserve, he says, if not necessarily the other coins.
“A strategic reserve of a precious commodity is for a specific purpose: To insulate the government or consumers from massive price swings. If you have a material amount of stablecoins on a particular chain, holding a strategic reserve of the gas token is similar to a strategic petroleum reserve,” argues Perkins. “If gas prices surge, it could put the brakes on the economy…Why wouldn’t you want to hold onto gas tokens that allow you to move stablecoins throughout the ecosystem?”
The simplest answer of all might be that Trump selected the coins just because they are American; with the exception of Ether, each was created by developers working out of the US. “We are MAKING AMERICA GREAT AGAIN!” wrote Trump, in his post about the reserve.
“I think that factored into the administration’s decision-making,” says one crypto industry source, who asked to remain anonymous in order to speak freely about the Trump administration.
But until the working group tasked by Trump in January with evaluating the prospect of a crypto reserve returns its findings, or the wheels begin to turn on the legislation that will likely be required to establish a formal reserve, any inquest remains premature.
“It’s hard to make an adjudication until there’s actually action,” says the source. “Nothing has happened. It’s largely been talk.”
