Trump Announces US Creation of Cryptocurrency Strategic Reserve: Market Volatility After a Brief Rally and Deep Analysis

Trump Announces US Creation of Cryptocurrency Strategic Reserve: Market Volatility After a Brief Rally and Deep AnalysisOn March 2nd (local time), former US President Donald Trump announced on his social media platform, TruthSocial, that the United States would create a cryptocurrency strategic reserve. This reserve would reportedly center on Bitcoin (BTC) and Ethereum (ETH) as core assets, alongside smaller, higher-risk tokens such as Solana (SOL), XRP (Ripple), and Cardano (ADA)

Trump Announces US Creation of Cryptocurrency Strategic Reserve: Market Volatility After a Brief Rally and Deep Analysis

On March 2nd (local time), former US President Donald Trump announced on his social media platform, TruthSocial, that the United States would create a cryptocurrency strategic reserve. This reserve would reportedly center on Bitcoin (BTC) and Ethereum (ETH) as core assets, alongside smaller, higher-risk tokens such as Solana (SOL), XRP (Ripple), and Cardano (ADA). The announcement immediately caused significant market fluctuations, with cryptocurrency prices experiencing a brief surge followed by a sharp decline, sparking widespread attention and discussion.

A Fleeting Crypto Rally: The Rise and Fall of Prices

Trump's statement sent ripples through the cryptocurrency market. CoinGecko data showed that within hours of the announcement, the total market capitalization of cryptocurrencies increased by approximately 10%, exceeding $300 billion. Bitcoin surged over 11%, Ethereum climbed roughly 13%, XRP rose by more than 30%, Solana jumped over 24%, and Cardano saw a daily increase of nearly 72%. This initial surge reflected the market's positive reaction to the seemingly "bullish" news, with investors anticipating that US government recognition of cryptocurrencies would boost industry growth and elevate their market standing.

However, this rally was exceptionally short-lived. Coindesk data indicated that by 11:30 AM on March 4th, Bitcoin had fallen over 9% to $83,986 per coin, and Ethereum had plummeted over 15% to $2,056 per coin, both below their pre-Trump-announcement levels. XRP and Solana almost entirely erased their gains, and Cardano also gave back most of its increase. In just a few days, market sentiment swung dramatically from euphoria to fear.

This volatility highlights the inherent risks within the cryptocurrency market. Market participants were divided in their interpretation of Trump's statement. Some viewed it as merely a personal preference or political strategy, not official US government policy; others worried it could introduce regulatory uncertainty and exacerbate market volatility.

Expert Interpretation: Policy Feasibility and Potential Risks

• Ma Tianping, a researcher at the Tsinghua University PBC School of Finance, stated in an interview with the Daily Economic News that within the US dollar system, cryptocurrencies remain essentially special commodities, their monetary attributes indistinguishable from those of ordinary goods. Incorporating cryptocurrencies into a strategic reserve presents numerous challenges.

Firstly, operational hurdles are significant. If the Federal Reserve were to purchase cryptocurrencies, it would compromise its independence and raise questions about the transparency and rationality of its decisions. If the Treasury Department were to use government bonds or tax revenue, it would require explicit authorization from taxpayers and Congress, otherwise raising concerns about the source of funds and decision-making at the national governance level.

Secondly, defining the "reserve" nature of cryptocurrencies is itself problematic. Unlike traditional reserves like oil or gold, cryptocurrencies lack intrinsic value support, their prices fluctuate wildly, making them unsuitable as stable and reliable reserve assets. Furthermore, moral hazards exist, such as the possibility of Trump selecting specific cryptocurrencies based on personal relationships.

Finally, the extreme volatility of cryptocurrencies presents significant risks to incorporating them into a strategic reserve. Any policy uncertainty or shift in market sentiment could lead to substantial losses.

Trump's Motives and Market Expectations

The precise purpose behind Trump's proposal for a "US cryptocurrency strategic reserve" remains unclear. Ma Tianping suggests that Trump may favor unregulated cryptocurrencies, hoping to improve the US financial environment. However, his choice of Bitcoin, etc., as core reserves might stem from personal interest, market performance, or other personal connections. Trump's previous launch of a personal meme coin, TRUMP, and his support for a project involving his son, called World Freedom Finance, have fueled speculation about his motives.

• The Wall Street Journal reported that details surrounding Trump's plan for a cryptocurrency reserve remain unknown. If expectations don't align with reality, the market could experience another downturn. Furthermore, macroeconomic concerns related to trade policy and other issues remain unresolved and could continue to weigh on the outlook for cryptocurrencies.

Cryptocurrencies Unlikely to Shake the Dollar System

Ma Tianping emphasized that even if the US incorporates cryptocurrencies into a strategic reserve, it doesn't signal that cryptocurrencies will replace or challenge the dollar's hegemony. Within the dollar system, cryptocurrencies remain commodities, their prices denominated in dollars and purchased with dollars. The relationship is simply one of "goods and commodities." For cryptocurrencies to fundamentally alter the relationship between money and commodities, making other currencies commodities, faces immense theoretical and practical obstacles.

QCPCapital, a crypto trading firm, also noted in a letter to investors that cryptocurrency volatility remains relatively high, with Bitcoin and Ethereum showing bearish put option tendencies before the end of March. The elevated VIX (fear index) indicates broader unease in the overall risk asset market, particularly following the recent escalation of US government tariffs.

White House Cryptocurrency Summit: Clues to Future Direction

On March 7th, Trump is scheduled to host the first White House cryptocurrency summit. Attendees will include prominent founders, CEOs, and investors from the crypto industry, along with members of the President's Digital Asset Working Group. The White House stated that the administration is committed to providing a clear regulatory framework that fosters innovation and protects economic freedom. This summit may offer further insight into the advancement of the US cryptocurrency strategic reserve plan and the future direction of the industry.

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