Trump's Announcement of a US Cryptocurrency Strategic Reserve: A Brief Rally Followed by Market Volatility and Deep Concerns

Trump's Announcement of a US Cryptocurrency Strategic Reserve: A Brief Rally Followed by Market Volatility and Deep ConcernsOn March 2nd, 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 include Bitcoin (BTC) and Ethereum (ETH) as core assets, alongside smaller, higher-risk tokens such as Solana (SOL), XRP (Ripple), and Cardano (ADA)

Trump's Announcement of a US Cryptocurrency Strategic Reserve: A Brief Rally Followed by Market Volatility and Deep Concerns

On March 2nd, 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 include Bitcoin (BTC) and Ethereum (ETH) as core assets, alongside smaller, higher-risk tokens such as Solana (SOL), XRP (Ripple), and Cardano (ADA). The announcement triggered immediate and dramatic volatility in the cryptocurrency market, with mentioned cryptocurrencies experiencing sharp price increases followed by a swift reversal, leading to widespread questioning of Trump's motives and the feasibility of his plan.

Initially, the cryptocurrency market experienced a short-lived rally. CoinGecko data showed a roughly 10% increase in the total market capitalization within hours of Trump's post, exceeding $300 billion. Bitcoin surged over 11%, Ethereum rose approximately 13%, XRP jumped over 30% surpassing $2.93, Solana climbed over 24% exceeding $178, and Cardano saw a near 72% intraday increase. This surge reflected a positive market interpretation of Trump's policy implications and potential impact.

However, this upward trend proved unsustainable. Coindesk data indicated that by 11:30 AM on March 4th, Bitcoin had fallen over 9% in the past 24 hours, trading at $83,986; Ethereum dropped over 15% in the same period, trading at $2,056. Both major cryptocurrencies fell below their pre-announcement levels. XRP and Solana almost entirely relinquished their two-day gains, and Cardano also retraced most of its increase. This rapid correction highlighted the inherent high volatility of the cryptocurrency market and its sensitivity to news-driven sentiment.

• Ma Tianping, a researcher at the Tsinghua University PBC School of Finance, expressed skepticism regarding Trump's controversial policy in an interview with the Daily Economic News. He argued that within the US dollar system, cryptocurrencies remain essentially specialized commodities, possessing no fundamental difference in monetary attributes from ordinary goods despite being called "currencies." He emphasized the unlimited potential for issuing diverse cryptocurrencies globally, lacking a solid theoretical foundation, a stark contrast to traditional monetary systems.

Ma Tianping further analyzed the technological and institutional challenges of incorporating cryptocurrencies into a strategic reserve. He noted that if the Federal Reserve were to purchase cryptocurrencies, it would compromise its independence, making it difficult to justify the selection of specific cryptocurrencies. If the Treasury Department used government bonds or tax revenue to purchase cryptocurrencies, it would require taxpayer consent and explicit congressional authorization, otherwise triggering significant controversy regarding funding sources and decision-making rationalea matter touching upon core national governance issues. Furthermore, he considered the very definition of cryptocurrency "reserves" problematic, fundamentally different from traditional oil or gold reserves, and potentially susceptible to ethical risks such as favoritism in selecting specific cryptocurrencies based on personal relationships.

Trump's motivations also sparked considerable speculation. Ma Tianping suggested that Trump's preference for unregulated cryptocurrencies stemmed from a desire to improve the US financial landscape. However, he also noted that Trump's choice of Bitcoin, etc., as core assets might be driven by personal interests, market performance, or other personal connections. Trumps launch of a personal meme coin, TRUMP, shortly after his previous term and support for a project involving his son, World Free Finance, have fueled external doubts about his motives, adding to the uncertainty and risk.

QCPCapital, a crypto trading firm, expressed caution in a letter to investors, pointing to the continued high volatility of cryptocurrencies and the bearish options sentiment for Bitcoin and Ethereum before the end of March. The high VIX (fear index) indicated broader unease in the risk asset market, especially after the recent US government tariff escalation.

• The Wall Street Journal reported that details about Trumps cryptocurrency reserve initiative remain unclear; a mismatch between expectation and reality could trigger another market downturn. Macroeconomic concerns related to trade policy and other issues remain unresolved and continue to weigh on the outlook for cryptocurrencies.

Ma Tianping concluded that incorporating cryptocurrencies into a strategic reserve carries considerable risk given their extreme volatility. While Trump's actions might be positive for cryptocurrency enthusiasts, from the perspective of the US dollar system, cryptocurrencies are merely one among countless commodities, priced and purchased in dollars, purely a "commodity and goods" relationship. Fundamentally altering the relationship between currency and commodities, making other currencies commodities, faces immense theoretical and practical obstacles.

On March 7th, Trump will host the first White House cryptocurrency summit, with attendees including prominent crypto founders, CEOs, and investors, as well as members of the Presidents Digital Asset Working Group. A White House statement outlined the administration's commitment to providing a clear regulatory framework, fostering innovation, and protecting economic freedom. This summit may offer further insight into the progress of the US cryptocurrency strategic reserve plan and the future direction of the industry, but could also exacerbate market uncertainty.

In summary, Trump's announcement of a cryptocurrency strategic reserve has caused significant volatility in the cryptocurrency market. Its underlying motivations, feasibility, and long-term impact remain highly uncertain. While the announcement briefly excited the market, the long-term effects remain to be seen, and market participants should exercise caution and closely monitor further developments. The event underscores the high risk and volatility of the cryptocurrency market, and the crucial role of regulatory policy in shaping its trajectory. The dollar's position as the world's leading reserve currency is unlikely to be challenged in the short term, and the role of cryptocurrencies within the global financial system remains to be definitively established.