The Breakdown - Trump's Strategic S#^@coin Reserve

Episode Date: March 4, 2025

Not the Strategic Crypto Reserve we wanted, but the Strategic Crypto Reserve we deserve? For an administration that set out to be the best friend of crypto, it's been amazing to see how many are up in arms at their various crypto decisions. In today's episode, NLW wades through the aghast takes to try to provide some semblance of analysis around why XRP and ADA are being included in a US Strategic Crypto Reserve. Sponsored by: Ledger Ledger, the world leader in digital asset security, proudly sponsors The Breakdown podcast. Celebrating 10 years of protecting over 20% of the world’s crypto, Ledger ensures the security of your assets. For the best self-custody solution in the space, buy a LEDGER™ device and secure your crypto today.Buy now on Ledger.com. Enjoying this content? SUBSCRIBE to the Podcast: https://pod.link/1438693620 Watch on YouTube: https://www.youtube.com/nathanielwhittemorecrypto Subscribe to the newsletter: https://breakdown.beehiiv.com/ Join the discussion: https://discord.gg/VrKRrfKCz8 Follow on Twitter: NLW: https://twitter.com/nlw Breakdown: https://twitter.com/BreakdownNLW

Welcome back to The Breakdown with me, NLW. It's a daily podcast on macro, Bitcoin, and the Big Picture Power Shifts remaking our world. What's going on, guys? It is Monday, March 3rd, and you better believe we're talking about the U.S. Crypto Strategic Reserve that was announced yesterday. Before we get into that, however, if you're enjoying the breakdown, please go subscribe to it, give it a rating, give it a review, or if you want to dive deeper into the conversation, come join us on the Breakers Discord. You can find a link in the show notes or go to bit.ly slash breakdown pod. All right, friends, well, we have a spicy one today. I'd like to start with a tweet from Travis Kling, which I think just perfectly encapsulates this moment.

He wrote this morning, still trying to wrap my head around how Trump has managed to piss off nearly everyone in crypto with his quote-unquote support for crypto. LMAO, it's amazing. So today, of course, we are talking about the Strategic Crypto Reserve. On Sunday morning, in a message on truth social that I 100% assumed had to be AI when I saw it reshared elsewhere, Trump posted, 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, Solana, and Cardano. I will make sure the U.S. is the crypto capital of the world. we are making America great again. And yes, that was the real message, XRP, Salana, and Cardano. Now, after almost two hours of crypto-twitter losing their minds at the obvious omissions, he circled back to add,

and obviously Bitcoin and Eth has other valuable cryptocurrencies will be at the heart of the reserve. I also love Bitcoin and Ethereum. Markets, of course, loved it. The entire market put in a god candle with total crypto market cap rising 11% in the space of a few hours. Bitcoin was up around 8%

after a $10,000 jump, but the named alt coins went absolutely ballistic. Ripple pumped by 25% and briefly had a larger fully diluted value than Ethereum. Solana enjoyed a 20% gain. Cardano, meanwhile, registered a 60% price spike with unquestionably its largest catalyst for the whole cycle. What we are going to do today, as we always try to do here at the breakdown, is go through the full plethora of takes. To find the people who are excited, to find the people who are not so excited, to find the people

who are mixed. feelings are running extremely hot both inside and outside the industry on this one. On the one end of the spectrum, for the Bitcoiners who anticipated a serious proposal with a geostrategic rationale, this fell, let's say, short of the mark. Bitcoin Policy Institute fellow Troy Cross summed up the general mood commenting, I can't find the words to express my dismay and disgust. Traders who are more focused on positioning to make money than judging the merits of policy were a little more excited.

Raul Paul, the CEO of Real Vision commented, the U.S. government is literally telling you they're going to kickstart alt season by buying your bags, something I never thought would be on my bingo card. Economist Alex Kruger wrote, Trump just behaved like an S-tier KOL, only that instead of pushing a bag, he pushed the entire industry, just when sentiment among many was at all-time lows. What an incredible timeline. Crypto exchange figureheads, who have the most to gain from the government buying altcoins, tried to have a nuanced take but couldn't quite get on board. Coimbe's CEO Brian Armstrong wrote, excited to learn more, still forming an opinion on asset allocation, but my current thinking is,

one, just Bitcoin would probably be the best option, simplest and a clear story as successor to gold. Two, if folks wanted more variety, you could do a market cap-weighted index of crypto assets to keep it unbiased, but probably option number one is the easiest. Cracken chairman Jesse Powell was a little more blunt, tweeting, I could be convinced about a Bitcoin reserve. Foiled Charzards, not so much. Even Peter Schiff had what some called his first good Bitcoin take ever, tweeting, I get the rationale for a Bitcoin reserve. I don't agree with it, but I get it. We have a gold reserve.

Bitcoin is digital gold, which is better than analog gold. So let's create a Bitcoin reserve too. But what's the rationale for an XRP reserve? Why the hell would we need that? Now, I'm not just going to read through the list of a gas takes. There are plenty of those. Probably you've been drowning in them ever since it happened. Instead, we'll try to get a little bit more nuanced with people who had taken the time to pull their jaws up off the floor and actually formulate a coherent thought. One of the loudest takes was that this was a political non-starter. Naval Ravacant wrote, The U.S. taxpayer should not be exit liquidity for cryptocurrencies that are decentralized in name only.

Ryan Selkis commented, I've shared my feedback on the crypto reserve in private and public. I'd rather have an admin do pro-crypto dumb stuff versus anti-crypto dumb stuff, but it seems like there's more political downside than upside for considering assets not named Bitcoin. Given that the proposal was having a hard time getting support from the crypto community, it's not unfair to say that it's potentially a big political liability for the president's larger crypto agenda. pundits and influential figures on the left had no trouble picking this apart. Jason Furman, former Democrat chairman of the National Economic Council, commented,

torn as to whether this is more dumb or more corrupt. Left-wing journalist Ryan Grimm wrote, This is a direct transfer of wealth from the U.S. Treasury to David Sachs and other crypto barons. The railroad and coal tycoons of the 19th century could never have dreamed of this level of heist. This is not a serious country. It's a very wealthy mark. And indeed and unfortunately, the notion that this was a corrupt maneuver was extremely resonant. Bucco Capital wrote,

They are talking about being good stewards of taxpayer money while simultaneously using your taxes to buy Cardano and Solana. They don't respect you. They're not looking out for you. They're here to enrich themselves while people cheer. Stock Viking tweeted, In 20 years of investing, this is the most corrupt thing I've seen in financial markets. Hello, friends, I am thrilled to share that Ledger is once again partnering and sponsoring

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what they have available to you. So thanks, once again, to Ledger for sponsoring the show. Indeed, unfortunately, when it comes to the negative narrative, there are multiple layers. There's the surface level self-dealing with the Trump family deeply. invested in Ethereum and Solana through various vehicles. Eric Trump has been dropping hints for weeks posting last Tuesday to encourage traders to buy the dips. There's also the complications around Cryptozar David Sacks and his venture in personal portfolio. Kraft Ventures is a sizable Solana investor through multi-coin, and this announcement coincided with a very large token unlock. Sacks said that he and Kraft Ventures liquidated all their crypto tokens before he joined

the White House, but didn't mention crypto equity or being an LP in crypto funds. And for those who were looking for evidence of corruption, there was some very odd trading activity during the weekend. On Saturday, a trader opened a 50x leveraged long position in Bitcoin and Eath on decentralized perps exchange hyperliquid. They put down 7 million in collateral, so represented 200 million in total size given the leveraged use. The position had such a thin margin of error that a 3% drawdown would have seen them liquidated. Speculation on Saturday night was that the trader either knew something or was insanely gambling away of fortune. The trade ended up netting $7 million once it was closed on Sunday afternoon.

leading many to conclude, as Blockgraze wrote, The hyperliquid guy actually knew something, lull. Notably, Coinbase Director Connor Grogan dismissed the idea that the hyperliquid whale was an insider. He found the wallet was funded from fishing attacks and commented, turns out he's just a gambler with stolen funds and not someone with inside info. More generally, the announcement came while the CMU was closed, locking Tradfi firms out of the trade. It led to the largest CME gap in the history of the Bitcoin contract with a $10,000 increase from Friday night's close.

Macroscope commented, Whoever is advising Trump on the timing of these posts knows what they're doing. Some large positions from last week are now badly off sides when trading opens. Eric Trump cheered the strategy, tweeting, I love the genius of announcing a strategic reserve on a Sunday when traditional markets are closed and Wall Street sleeps. For the first time, retail investors win. Traditional finance better catch up or it will quickly become extinct.

The world no longer runs on a Monday to Friday 9 to 5. Importantly, whether or not anyone in the Trump camp actually profited from the news, The appearance of corruption is just not a great look. Dmitri Kofinus, the host of Hidden Forces, prefers the subtle corruption of his youth, tweeting, call me old fashion, but I prefer the world where Alan Greenspan and Bill Clinton were racking up millions and speaking fees to one where we used taxpayer dollars to do crypto buybacks for David Sachs, Jason Kalakanis, and the SPAC King. So what about trying to find some analysis that isn't just about insider dealing, that tried to

come from a non-synical point of view? Trump's crypto policy has been America-centric since it began. Remember, during the Bitcoin conference speech, he said that he wanted to see all future Bitcoin mind in the U.S. More recently, there's been a suggestion that capital gains tax would be removed from U.S.-based crypto. Of the major altcoins, ripple Cardano, and Solana are the three that were founded here in the U.S. There's also a thought that this is Trump trying to pump the bags of the average U.S. crypto investor. Yet he gave away the CEO of Wintermute commented, this is the average American crypto portfolio. Why are you surprised? The intern account tweeted,

can we get a little transparency on how XRP Sol and Cardano were chosen for the reserve? Like, did they have a discussion about this, or did they just poll 10,000 Uber drivers and call it a day? Nick White, the COO of Celestia, added, two explanations for this. One, Trump knows as much about crypto as your taxi driver. Or two, Trump wants to buy the loyalty of the taxi driver type of investor. Another take was that this is a little more 4D chess. The logic here goes that Trump doesn't have the power to set a large and lasting crypto reserve by Sunday night decree, and will likely then need to negotiate with Congress. BitPain wrote,

Remember, Trump always asks for more than he intends to get. If you want a Bitcoin reserve, you ask for a Bitcoin Plus reserve, then you compromise with the Bitcoin Reserve, which now seems like a reasonable middle ground. Beanie Maxi tweeted, if you can't read between the lines, it's pretty obvious that there will never be a crypto-strategic reserve full of random tokens. Trump's a master negotiator, and since he needs Congress on his side, he'll naturally start with a preposterous ask. Bling this out a little farther, it could even be useful to get the crypto industry

to align ahead of this week's summit. Last month, it was reported that Trump world sources were frustrated by the amount of infighting happening in the industry. And now, within 24 hours of Trump's post, feels like the entire industry is Bitcoin only when it comes to the reserve. Another salient point is that this isn't necessarily what Trump himself wants to include in the reserve. It's a statement that sets the parameters for the crypto working group who have been tasked

with studying the idea and presenting a report in April. To that end, the first crypto policy summit will be held at the White House on Friday. The reserve will no doubt be a high. topic of conversation for the assembled industry leaders. Through that lens, it seems kind of reasonable to start from a place of considering all U.S.-based tokens and narrowing it down. Raoul Paul made the point that it's unlikely that the U.S. government ends up buying billions of dollars worth of altcoins even if they form part of the reserve, tweeting, it's possible they just use an index of U.S.-based crypto by market cap plus Bitcoin and ETH to be neutral to let the market decide. If they did take an index approach,

the three controversial tokens would be around a 10% waiting. Bitcoin Magazine's CEO David Bailey who was hugely involved in getting Trump on the crypto train, wrote, Caught by Surprise by Today's News. Guess we know what the topic of conversation will be at the summit. Working to confirm details now. Doesn't look exactly as expected, but nonetheless, a Bitcoin stockpile. So what to conclude from all of this? The TLDR is that basically no one in the crypto industry

is actually arguing Solana Cardano and XRP to be strategically important assets. Many, as we've discussed, are arguing that if there is going to be something like this, It should be Bitcoin only. But there's also the point of the longevity of this. Nick Carter tweeted, If you think the SBR or Crypto Reserve or whatever should be done by executive fiat, answer me this. It's January 29th, 20209, day one of President AOC's term. Her fingers hover over the market sells the government's $1 million Bitcoin button.

Do you feel lucky? I think at this point, the one thing that we should know for sure is that volatility and unpredictability are key tools of this administration. I have no idea where on the spectrum from corruption to idiocy to 40 chess and negotiating strategy to America First crypto policy this actually is. But it is important to remember that this is the beginning of a policy discussion and not the end. Holding aside bag holding, if you just want to take it from a good news perspective, this proposal puts the Bitcoin Strategic Reserve back in the conversation at a time when the market could use some good news. Indeed, Camila Russo,

head of defiant news, urged a little perspective, tweeting, crypto was borderline illegal in the U.S. just months ago, and now some people are upset because the government wants to buy too many tokens. Let's just take the win. And I think that's fairly good energy to take into this. That doesn't mean don't get involved, and that doesn't mean don't keep screaming. I think the crypto industry speaking in a loud, clear, and consistent voice on this could be very powerful. For now, though, if nothing else, get out the popcorn, because the next phase of interesting Trump crypto policy has officially begun. That's going to do it for today's breakdown. Appreciate you listening, as always. next time, be safe and take care of each other. Peace.