Bitwise: The market is wrong. Trump's strategic crypto reserve is essentially a big positive.

A strange thing has happened in the past few days.

On Sunday, President Trump announced that the United States of America will create a strategic cryptocurrency reserve holding five crypto assets: Bitcoin, Ethereum, Solana, XRP, and ADA.

The market initially rallied sharply after the news broke, with the price of Bitcoin jumping from $85,000 to $95,000 immediately. But as Sunday wore on and Monday came, the market began to fall back. As I write this memo, Bitcoin and the other assets mentioned in the announcement have not only given back all of their gains, but have fallen even more.

Crypto assets rise, then fall after reserve announcement

Data source: Bitwise Asset Management, data from CoinGecko. The data range is from February 27 to March 3, 2025.

You might ask: Why is this happening? Isn’t this good news?

The short answer is “good news,” as I’ll explain in more detail in a moment. But that’s not what the market is saying. Instead, market participants are reacting negatively to the announcement because the proposed reserve includes more than just Bitcoin.

In particular, the inclusion of a speculative asset like ADA feels more calculated than strategic.

Several prominent figures in the cryptocurrency space have questioned the reserve and the inclusion of non-Bitcoin assets. (See tweets from Coinbase CEO Brian Armstrong and Castle Island founder Nic Carter.) At Bitwise, we also believe that the optimal form of the reserve should consist only of Bitcoin, as our CEO Hunter Horsley wrote on Sunday.

Even though the rollout was flawed, I think the market read it wrong. Ultimately, this is good news, and I think the market will come to agree with that view sooner or later.

Here are three things I think the market is missing:

Point 1: The initial proposal is not the final solution

One thing we’ve learned so far is that Trump’s initial proposals are rarely the final solution. That was true with tariffs, and it’s likely to be true here as well.

In the coming days, cryptocurrency industry bigwigs will voice their opinions on the proposed reserve. For example, on Friday, David Sacks, the White House cryptocurrency czar, will host a cryptocurrency summit with industry leaders at the White House, and I’m guessing the proposed reserve will be a key topic.

It’s possible that the opposition to this announcement would be great enough that the entire reserve program would be canceled, or perhaps limited to assets previously held by the U.S. government through forfeiture. But I doubt it.

In fact, I think the boldness of the initial proposal has widened the Overton Window for reserves. Before Sunday, the idea of ​​a strategic cryptocurrency reserve seemed unlikely. Now, a reserve consisting only of Bitcoin sounds almost conservative.

When the dust settles, I expect the final reserve to be almost entirely Bitcoin and to be larger than people think.

Point 2: Other countries are more likely to follow suit

As markets worry about the political reaction in the United States to the proposal to include five assets, it is important to remember that the most important audience for this news is not in the United States, but abroad.

Some Bitcoin supporters are excited about the idea of ​​the U.S. building a strategic Bitcoin reserve because they expect it will spark a global race for countries to prepare for Bitcoin to become a globally important monetary asset.

Assuming the U.S. reserve plan is implemented in some form, it’s hard to imagine that other countries won’t follow suit. This is already an emerging trend: El Salvador, Bhutan, and Abu Dhabi have all publicly purchased Bitcoin, and there are rumors that other countries are also buying.

If you are Honduras, Mexico or Guatemala, and you see El Salvador and now the US buying Bitcoin, can you really afford to have zero? If you are Dubai, Qatar or Saudi Arabia, and you see Abu Dhabi and the US grabbing the lead, can you be comfortable? How will Russia and China react?

Last week’s announcement — while imperfect — marked the first time the U.S. has designated Bitcoin as a strategic asset. As long as that remains the case, this is a game-changer in my opinion.

Point 3: Once a cryptocurrency is bought, it is unlikely to be sold

Some observers worry that building a strategic cryptocurrency reserve during Trump's presidency will create a cycle of buy-sell volatility with the change of elections. When Trump leaves office in four years, will the Democrats take power and sell off the US's cryptocurrency holdings?

In my opinion, this scenario is unlikely to happen. Enthusiasm for cryptocurrencies in the US is uneven: there are a fair number of people who love cryptocurrencies and a relatively small number who hate them. We learned from the last election that Republican support for cryptocurrencies won them a lot of votes, while the Democratic hostility to cryptocurrencies did them little good. I doubt that any cryptocurrencies purchased will be held for the long term, just like the US gold reserves. Democratic leaders will not want to alienate voters without doing themselves any good.

in conclusion

It’s frustratingly hard to have a pure win in crypto these days. If Sunday’s announcement was “just” about building a strategic Bitcoin reserve, I think the market would be higher. The inclusion of smaller market cap assets in the announcement unnecessarily complicates things. The biggest risk is that the market is so turned off by the proposal that the simplified Bitcoin-only reserve plan is also scrapped.

But I think that’s unlikely to happen. So far, the Trump administration seems to be sticking to its policy goals, and I expect some version of this proposal will eventually move forward. And, while the rollout and specifics aren’t perfect, I suspect the final version will be pretty good.

Ultimately, I think the market’s initial reaction was correct: the U.S. government’s designation of crypto assets as “strategic assets” is positive news. I think the market will eventually recognize that.