Trump Announces the Coins to Go in His Crypto Reserve

Forget “Make America Great Again.”

Donald Trump is looking to make crypto great again…

And that has riled up those who love to be riled up!

Maybe you saw Trump’s recent announcement, maybe not, but in short, #47 has stated in no uncertain terms that he will create a cryptocurrency reserve for America. Because as DJT put it in a social media post:

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. I will make sure the U.S. is the Crypto Capital of the World. We are MAKING AMERICA GREAT AGAIN!

A bit later he clarified to add that “obviously, BTC and ETH, as other valuable cryptocurrencies, will be at the heart of the Reserve. I also love Bitcoin and Ethereum!”

(Just to clarify all the acronyms: XRP is Ripple, SOL is Solana, ADA is Cardano, and BTC/ETH are bitcoin and Ethereum, the two Grand Poohbahs of the cryptoconomy.)

To launch America into the crypto future, Trump also announced that he’s convening a crypto summit today (Friday, March 7). He’s bringing together policymakers and industry honchos to start laying the groundwork for the policies and regulations that will shape the industry in America going forward.

Now, you know I’m a huge crypto fan. I’ve been writing about crypto for years, and I’ve been involved in this space since 2017, when I first started building rigs from computer parts to digitally mine Ethereum and a crypto called Z-Cash. (I’m now mining bitcoin from a tiny little “lottery miner” on an office shelf… but more on that in an upcoming column).

While I am a fan of crypto and while I see the blindingly bright future crypto is already beginning to usher in, I know a lot of people aren’t fans and don’t understand crypto in the slightest. A lot of them are riled up by Trump’s crypto proclamations.

I’ve seen oodles of news reports with various people insisting that crypto is a Ponzi scheme, that this will undermine the dollar, and that a crypto reserve is just another Trump Family Pump-n-Dump Money Grab.

Nevertheless, as my managing editor said to me, “Two things can be true at once. Trump may be happy to boost these assets so he/his family/his circle can profit by buying before they make these big announcements and then selling after they make big announcements that boosts prices. But also it can be true that the idea of a strategic reserve is smart.”

So, let me explain why a crypto reserve is smart… though there are some obvious dangers to be aware of as well.

1. What is a crypto reserve?

I guess the best way to think about this is to consider an emergency savings account families often have—a source of money on hand purely for emergencies or maybe for buying a house or other big-ticket item.

Only, in this case Trump wants to build a reserve from certain cryptocurrencies.

America has other reserves, including the Strategic Petroleum Reserve, a uranium reserve that Congress established in 2020, and of course there’s the gold (supposedly) at Fort Knox… as well as strategic reserves for grain, home heating oil, and vaccines/antidotes/anti-toxins. (We once had reserves for helium and raisins.)

All of these are designed for the US government to draw upon in emergencies—though what defines “emergency” is not clearcut.

A crypto reserve would hold a strategic amount of crypto, aiming to help the US diversify its financial holdings, which could help it better weather another global financial crisis. Basically, a giant financial hedge against fiat currency collapse, since crypto (particularly bitcoin) tends to be seen as an anti-fiat asset.

2. What is the benefit of a crypto reserve?

A typical savings account grows only as fast as the rate of interest allows, and right now that’s low.

Assets such as bonds grow equally slowly. Stocks grow faster, but—as an asset class—not nearly as fast crypto.

So, one of the benefits is that crypto promises to grow far faster than other investment options. Plus, there’s the asset-diversification angle I mentioned above. Crypto, particularly bitcoin, moves differently than other assets.

A small exposure to crypto can lead to extremely large gains that the government could use to pay down (potentially substantially) America’s comically outlandish debt.

3. What’s the downside?

There are two notable risks to consider: price volatility… and government itself.

Crypto prices move like a manic-depressive. When prices are manic, they’re really manic. We’ve had crypto in my Frontier Fortunes portfolio that were down 92% only to surge so strongly in just a month or two that subscribers were able to lock in gains of more than 330%.

Then again, that same example speaks to the fact that when crypto is in a depressive mood, prices can be down 90% for no real reason other than investor sentiment.

As for government… well, I’m not sharing any secrets here when I say that American politicians over way too many decades have shown the fiscal restraint of a gambler on a never-ending losing streak, who just keeps on borrowing money from anyone he can sweet-talk.

The DC Clown Show will, at some point, see the wealth that has accumulated in the Strategic Crypto Reserve, and it will want to tap into that money to pay for some sop to voters that will help one party or the other get elected. Or a president—Trump or someone else—could see that stash of wealth as a slush fund for some pet project.

So, the fund would need to be administered by a third party that is immune from government stupidity, because government stupidity is 1,000% guaranteed to be baked into the reserve’s future. 

4. Why is Trump doing this?

Cynically, one could say this is just a way for Trump to repay the “crypto bros” whose vote helped usher him into office again. Or, one could say that Trump is just pumping the price higher so that crypto bros close to him can sell into the spike.

And both of those rationales are a solid “maybe.” Impossible to know for a fact.

But there’s another reason: Trump is looking to future-proof the US economy.

Crypto is the future. It’s not a Ponzi, a scam, a flim-flam. Whatever.

Very real businesses right now are using crypto technology. Businesses that you know: PayPal, Shopify, Mastercard, JPMorgan, Goldmans Sachs, Walmart… the list is long!

They’re moving into crypto for the exact same reason they were quick to adopt the internet 30 years ago: efficiency and the opportunity to earn more money.

Far from being a scam or useless, crypto has real use-cases that cannot be replicated in the non-digital world.

One example: A New York company called Parcl Labs has created a financial product in which every new real estate listing, every sale, and every price change in a specific Metropolitan Statistical Area is captured and turned into a “price per square foot” number for that MSA.

Parcl updates and tracks that number every single day. There’s no way to easily do that in the real world. But on the crypto-based blockchain, Parcl can gather up all the data immediately because of underlying technology. The closest competitor, Standard & Poor’s Case-Shiller indexes, are three-months old at their youngest.

Wall Street traders are already using Parcl.

Trump realizes this future is descending upon us, and he realizes that just as America was an internet leader in those early days (Google, Amazon, Netflix, etc. etc. etc.), the US should be the leader in crypto, which is effectively a new version of the internet.

So, he’s looking to put in place the infrastructure necessary to turn America from crypto wasteland (which it has been for several years) into “the Crypto Capital of the World,” as he calls it. A strategic crypto reserve is just one, highly visible part of that effort.

The other possibility: Debt.

Trump has made off-hand comments about, “Maybe we’ll pay off the [US’] $35 trillion [debt] in crypto. How do you like that? I’ll write on a little piece of paper, ‘$35 trillion crypto’—we have no debt. Right? That’s what I like.”

If the crypto reserve grows large enough in time, the government could very well use profits to pay off some or all of the debt (assuming politicians don’t raid the cookie jar in the meantime.)

There’s still a lot more to talk about… so we will pick this up again with tomorrow’s dispatch…