This is a segment from the 0xResearch newsletter. To read full editions, subscribe.
On Sunday morning, Trump announced on Truth Social his plans to enact a “crypto strategic reserve.”
Which assets? The anointed few: XRP, SOL, ADA, ETH and BTC and maybe more.
Markets loved it, of course. BTC jumped 6% on the day, ETH was up 5.3% and XRP rippled up 18%. But the reality is that the reserve is still just talk, pending Congressional action.
Source: Twitter
Putting aside legal issues, the idea that the US should build a crypto reserve is itself completely bizarre, and therefore should be treated with skepticism.
Countries typically establish gold or reserves in foreign currencies for reasons of economic stability and to bolster confidence in their own financial systems.
For instance, when the Swiss franc appreciated rapidly against the euro during the global financial crisis, the Swiss National Bank intervened in March by selling francs and buying euros to protect its export-driven economy.
Gold, on the other hand, serves as a hedge against fiat currency depreciation, and the largest central banks in the world buy them for that reason. Maybe you don’t buy into that thesis, but it reflects more than two thousand years of the metal’s history in being used as money.
What qualifies XRP, SOL, ADA, ETH and BTC to be national reserve-worthy?
Let’s start with the easiest: bitcoin. Bitcoin has the longest history of about 17 years, more than any other asset on Trump’s shopping list. But compared to gold, bitcoin has been around far too short to prove itself as an “inflation hedge.”
One could argue that there is sufficient empirical evidence in the history of the blocksize wars to prove the asset as being durable and resistant to change (like gold). Okay, fair enough, though still a bad idea for a strategic reserve.
ETH? Ethereum is a technological marvel, but an asset that struggles with value accrual and which is subject to a technological roadmap means the American taxpayer is effectively taking a bet on an equity-like asset, contrary to the entire purpose of a national reserve.
SOL? SOL was until last year a devastated asset, revived only by memecoin trading. That doesn’t sound like something US tax dollars should be spent on.
Cardano and Ripple? Seriously? Both chains struggle to even find product-market fit in the circular industry of crypto and don’t crack the top 10 TVL page on DefiLlama, let alone having the merit to belong in a national reserve.
None of the above crypto assets are needed in a “strategic reserve” for the Fed to protect the dollar, conduct monetary intervention or strengthen the American economy.
