Build Your Own Crypto Reserve

We pick up today where we left off yesterday… on Trump and his plans for a US Crypto Reserve.

The story so far: Trump has announced plans to build a financial reserve fashioned from five cryptocurrencies (bitcoin, Ethereum, Ripple, Solana, and Cardano), and there are A) lots of people who are riled up by this because they don’t like or don’t understand crypto, and B) lots of people who simply don’t understand what this whole shebang is all about in the first place.

Given that I’m a big fan of crypto, given that I have about 25% of my net worth in various cryptocurrencies, and given that I’ve been deeply involved in crypto since 2017 (crypto miner, crypto journalist, head of an NFT division for a European blockchain, etc.), I’m answering the big questions that explain the “what” and “why” of a US Crypto Reserve.

(If you missed Part 1 of the Q&A—you can catch that here.)

So, on with Part II…

5. Will government buy crypto on the open market or build up the reserve through confiscations?

A bit of both.

The US already owns, by way of confiscation, 207,000 bitcoin, worth about $19 billion (seizures of the proceeds of crime, etc.). And that’s sure to grow here and there from other confiscations. For the same reason, it also owns about $100 million worth of Ethereum.

But to build out the reserve as Trump envisions it, the US would be buying crypto on the open market.

Wyoming Sen. Cynthia Lummis, one of the most vocal crypto proponents in Congress, has said the goal is to buy 200,000 bitcoin every year until the US owns 1 million bitcoin. That would be done on the open market.

Same with buying all the other cryptocurrencies on Trump’s list—though there’s no word yet on how much of the other crypto the US would look to own.

6. Why these five specific crypto?

Hard to say exactly, other than the fact that these five are among the largest crypto in the world, as defined by market cap. And some of them are American crypto projects, such as Solana and Ripple, which jibes with Trump’s “America First” brand.

Bitcoin and Ethereum are the two largest cryptocurrencies in the world. Ripple is #3, Solana is #6, and Cardano is #8. The point being that they are very large and very liquid. Cardano, the smallest of the group, regularly sees daily trading volume in the billions of dollars.

A separate note: Trump’s team also has plans for a 0% capital gains tax on US-based crypto. That proposal is not part of the US Crypto Reserve idea, but if it comes to pass then Solana and Ripple—as US-based projects—would also benefit from this.

7. Should I buy these cryptocurrencies, and what does government buying mean for the price?

I don’t typically throw out buy recommendations in Field Notes.

But I have said to anyone who will listen that everyone should hold a minimum 5% of their portfolio in bitcoin. If it goes to $0, you’ve lost a year’s worth of dividends basically. And if it goes where I and so many others who understand the cryptoconomy think it will go, then 5% in bitcoin is going to supercharge your portfolio.

And frankly, if bitcoin is the only crypto you own, you’re already well ahead of where 99% of people will be when the world realizes, “Damn! I should have listened to that Jeff guy…”

Owning the others depends on what level of exposure you want to crypto, your tolerance for crypto’s risk and volatility, your personal financial situation, etc.

The others are nice to have; I own them all to various degrees. But at the most basic level, you could just own bitcoin and go about your daily life knowing that as the cryptoconomy grows, your wealth is growing too.

As for price… government buying means higher prices at the margin, particularly early on when the reserve is officially announced and exuberance floods the market.

But these five crypto aren’t dependent on the US government going on a buying spree. They were doing well before Trump’s interest, and they’ll continue to do well.

8. What can the US do after setting up a crypto reserve that it can’t do now?

Technically, nothing.

A crypto reserve wouldn’t really change anything, just like America’s gold reserves don’t really change anything.

Only… it could actually change a lot.

Paying down the debt, as I mentioned in Part I, could be one benefit that the US can’t pursue right now. America isn’t likely to ever be in a situation where it earns every year so much more than it spends that it can take a large surplus and begin to pay down the debt. Not gonna happen anytime soon.

Crypto profits would potentially allow for that.

Building a financial fortress against a fiat currency crisis is another plus.

And the world would very likely look upon the dollar as more than just the cleanest shirt in an otherwise very dirty hamper of nasty currencies. The dollar would be implicitly backed by America’s crypto holdings (and gold holdings, particularly after Trump reprices those gold holdings higher, as is likely—more on that soon).

That would bolster the dollar in a crisis, which would help protect American families, even if they don’t own any crypto.

9. Doesn’t government ownership of crypto undermine crypto’s original ideals?

When Satoshi Nakamoto, bitcoin’s anonymous founder, launched bitcoin 15 years ago, he did so with this phrase etched into the coding of the very first bitcoin: “The Times 03/Jan/2009 Chancellor on brink of second bailout for banks.”

It was a comment on how governments easily devalue fiat currencies to protect banks and businesses at the expenses of people. Crypto, he saw, was the antidote because it took control of a currency out of government hands.

The US Crypto Reserve would not change that.

The US, or other governments, cannot control bitcoin because they don’t control the network on which bitcoin exists. No one controls it because everyone who runs a bitcoin node controls it. I won’t dive into explaining nodes, just know that they control the network. For government to control the network, it would have to take control of the nodes (nearly 22,000 globally at the moment, soon to be one more when I finish building my node)… and that will never happen.

So a crypto reserve does not change the ideal that crypto was built on, to protect humanity from the worst financial inclinations of politicians and the governments they corrupt.

And all of that, dear reader, is what a crypto reserve really means.

I’m for it—100%.

It gives America a very different financial asset and it sets the country up for a future that is already taking shape. Moreover, it puts the US at the forefront of what I’ve taken to calling the “Bitcoin Arms Race.” You see, every other nation of note will also rush to build their own crypto reserve as a way to protect their own currency and economy.

That’s already happening, by the way. Numerous countries—as well as some cities and as many as 18 US states—are already exploring the idea of building their own crypto reserve.

Yes, risks abound.

Then again, there are very real risks in owning US Treasury paper when the country is so deeply indebted and the political landscape is so divisive that debt default is tossed around as a threat to punish one party or the other.

And there are very real risks owning stocks at the extreme valuations they trade at today.

Crypto is just a different sort of risk, but with a reward potential that is exponentially larger than what any other asset class offers.

I just hope government doesn’t screw it up.

But of course it will.

Which is why I have my own crypto reserve, and why I encourage you to build your own reserve too.