From Reservations To Crypto Reserves

by Ryan Shea

At the start of every year Trakx publishes its annual crypto outlook. In it we outline our predictions as to what will be the three most significant influences on digital asset markets over the coming 12 months¹. In our 2025 outlook the first of our three predictions for this year was “the establishment of at least one officially-sanctioned Bitcoin strategic reserve”.

As we wrote at the time, given Trump pledged to establish a strategic Bitcoin reserve during his campaign to retake the White House this prediction was low hanging fruit. Although to be fair, politicians delivering their pre-election promises in full are about as rare as hens’ teeth so the outcome was by no means assured. In the end though, President Trump made good on his promise (as he has done with many of his campaign pledges, including the pardoning of Silk Road creator Ross Ulbricht) and on March 6 by executive order he established a US strategic crypto reserve.

A Bold Move

The decision is certainly bold because the US is the first economically significant nation-state to deliberately choose to hold digital assets on its sovereign balance sheet. We say deliberately because the governments of many countries have digital wallets containing cryptocurrencies as a result of seizures made during prior criminal investigations.

Historically, these digital assets have been sold-off with apparently little-to-no regard for maximizing the financial return to taxpayers. Indeed, commenting on X about the new US strategic crypto reserve, David Sacks – the recently appointed Crypto and AI Czar – noted that if the US government had held onto their seized Bitcoin they would been $16.4bn better off than they were from selling it. Even for a country the size of the US, that is a substantial sum.

Source: X

The US is not alone in this regard, other countries have also experienced sizable opportunity costs from badly timed sales of seized cryptocurrencies. Last summer, for instance, the German government sold 50,000 Bitcoin at an average price of $55,000. The $2.5bn raised is impressive at first glance, but consider that if they had decided not to liquidate their holdings, just six months later they would be sitting on crypto bags worth $5bn.

While German tax payers must be lamenting their government’s anti-crypto stance, the position of their political masters is very much in keeping with the regional norm. EU politicians and policymakers have long adopted a sceptical approach to digital assets, perhaps best exemplified by the ECB’s sustained criticism of Bitcoin – see image. (FYI: The timing of this post was extremely unfortunate for its authors as it coincided almost perfectly with the cycle bottom in Bitcoin and since then its price has gained 5X – ouch!)

Famous Last Words…

Source: X

Unlike the US, there is no hint of a pivot to a more crypto positive stance in Europe. In fact, recent comments by leading policymakers in the region point to continued opposition. Back in late January ECB President Legarde expressed her high confidence that “Bitcoins will not enter the reserves of any of the central banks of the general council” – a statement made in reference to the decision by the Czech National Bank to consider such a proposal. Even more forcefully, Bank of France Governor Villeroy last month warned that “[b]y encouraging cryptocurrencies and non-bank finance, the US administration is sowing the seeds of future upheavals”.

Don’t Be A Canute

For EU-based crypto fans, such remarks may be a touch disappointing but it is important to recognize that, being a digitally native asset, crypto is no respecter of geography meaning its fortunes are driven by global not regional trends.

Despite the Eurozone’s vast size and economic strength it does not, for instance, compare to the US – the most important and influential nation-state by a significant margin. Having taken the lead in establishing a strategic crypto reserve, other nations are highly likely to follow the US rather than risk being left behind in the digitally dominant world that is emerging². In contrast, by choosing not to embrace crypto, EU policymakers and politicians appear to be rather like King Canute ordering the tide not to come in³ – see image.

Source: imgflip.com/memegenerator

Disappointing Details

While the anticipation of nation-state adoption of digital assets has been one of the most important drivers of the recent crypto bull-run (and will be again over the medium-to-long term for reasons alluded to in the preceding paragraph), the market reaction to Trump signing the executive order establishing the reserve was anything but positive. Prices slumped in knee-jerk reaction, with our flagship large cap Top10 Crypto CTI dropping almost 20% over the next few days, a move that went well beyond a standard “buy the rumor, sell the fact” type reaction. This was because with Trump having named five tokens – XRP, Solana, Cardano and (belatedly) Bitcoin and Ethereum – as likely candidates for inclusion in the strategic reserve just days prior, investor hopes were high that the US government would become a previously untapped source of crypto demand as evidenced by the one-day 50% rally in our Cardano Ecosystem CTI.

Unfortunately for the bulls, the executive order made clear the US strategic crypto reserve would be initially seeded only by Bitcoin seized by the government during earlier criminal or civil cases. Yes, it means that a potential source of supply has been removed from the market – and that is, on the margin, positive – but it was not the sort of buy programme some crypto players had clearly positioned for. Furthermore, it is unclear at this stage how exactly the Trump administration intends to add to this initial stockpile of Bitcoin because the executive order says it must be done via “budget neutral strategies”. Consequently, as these details were unveiled crypto prices dropped sharply, especially Cardano and related tokens – our Cardano Ecosystem CTI fell 25 percentage points in response – given they were very much wildcards for inclusion prior to Trump’s comments.

Not Everyone’s A Fan

More substantively, not everyone within the industry is a fan of a government adoption of crypto. Writing for Coindesk just a couple of days prior to the executive order being signed, Nick Carter outlined eight reasons why he is not a fan of the government establishing a strategic crypto reserve. With a list so long naturally some of his reasons are stronger and more valid than others.

One of Carter’s objections to the creation of such a fund goes directly to the heart of the problem, namely his view that there is no “strategic” value in Bitcoin. His argument is that with only 5-20% of Americans owning Bitcoin, it is not an essential commodity whose supply disruption in a time of crisis would threaten their quality of life – the typical justification for owning a strategic reserve like the SPR (strategic petroleum reserve). This argument certainly has merit as things currently stand but it is probably rather myopic⁴.

Source: imgflip.com/memegenerator

In just 16 years Bitcoin has gone from tech plaything to a respectable financial asset handled by large tradfi institutions – including the world’s largest asset manager (BlackRock) – who value its ability to serve as a fiat money hedge at a time when the balance sheets of governments (which is what ultimately backs fiat money) are far from pristine. Indeed, as I have argued in a previous research note, relative to all other feasible candidates – not just crypto – Bitcoin is the most ideally suited international reserve asset . Moreover, due to its rigid supply curve—which becomes almost vertical after four halving events—Bitcoin’s price is highly sensitive to demand shocks. In a world where crypto adoption surges alongside the expected explosion of AI technology usage, this means there is a strong first-mover advantage. Such a game-theoretic price dynamic is something the Trump administration is undoubtedly looking to capitalize on.

Positioning For The Future

Certainly, this bullish perspective accords with the thinking of Michael Saylor, chairman of Microstrategy – the IT turned leveraged-long Bitcoin holding company. Speaking at the Bitcoin Policy Institute last month, Saylor stated that he considers Bitcoin to be much more than just an ideal form of money or a digital asset able to act as a store of value. He also views Bitcoin as digital property, an energy network and even went as far as to characterize it as a defense system. (In doing so, he aligned himself with the Bitcoin hypothesis promoted by Jason Lowry – a Major in the US Space Force – in his book SoftWar – a book that, it is fair to say, divides the Bitcoin community).

According to Saylor’s vision, Bitcoin represents the cornerstone of the new digital age soon to be heavily populated by AI models/agents (Heads up : check out our newly released AI Agents CTI) who, as he correctly points out, won’t have access to traditional bank accounts so will need alternatives to fiat money to make real world economic transactions. On this basis, he estimates that by 2045 Bitcoin will account for between 2-22% of worldwide assets, which translates into an estimated market cap of between $68-1,030 tr (at the time of writing it stands at $1.3tr!) – see image.

Source: Bitcoin Policy Institute

Saylor is clearly someone who does not shy away from making bold predictions. Given his very optimistic assessment, he (unsurprisingly) strongly advocates for the US federal government going beyond what has already been announced in terms of establishing a strategic crypto reserve and actively purchase Bitcoin in order to ensure the continued financial supremacy of the US.

Along side Saylor as he gave his presentation was the renowned pro-Bitcoin Senator Cynthia Lummis, who last month reintroduced a bill directing the US government to purchase one million Bitcoins over the next five years (200,000 Bitcoin per year). Her prominent attendance at the event, not to mention Saylor’s participation in the first White House Digital Assets Summit held on March 7, where he outlined his crypto strategy, strongly suggests the Trump administration is sympathetic to Saylor’s way of thinking. As such, the probability of the US federal government implementing a Bitcoin/crypto buy programme over the coming years is probably quite a bit higher than one would think based on last month’s negative reaction to the executive order establishing the strategic reserve.

Looking Beyond Price

In addition to focusing on the immediate price impact arising from the US establishing a strategic crypto reserve, it is also worth contemplating what other changes could flow from this decision. One of the more thoughtful considerations we recently came across was from former Bitcoin dev James O’Beirne. He pointed out that as Bitcoin becomes of “strategic importance” to the US government it is unimaginable they will leave project development to chance by a bunch of open source devs. As per his tweet below, this means probably translates into instant protocol ossification.

Source: X

If correct, and we think his assessment is, then for conservative Bitcoiners who fear future protocol changes could be detrimental and/or jeopardize its future as a trust-minimizing decentralized, immutable monetary system, last month’s executive order constitutes great news. It was quite the opposite though for those who think that without additional protocol changes Bitcoin will be unable to adapt to new challenges, especially the important issue of scaling (a topic that also featured in our 2025 Crypto outlook). Which of these two camps will ultimately be proved correct is hard to say at this point in time, but what is clear is this will remain a live topic within the Bitcoin, not to mention, wider crypto community so expect the heated debates to continue in the months and years ahead, especially given the number of strategic crypto reserves is only set to increase!

1 Also included is a review of how our predictions from the previous year performed because, unlike many financial pundits, we believe that we should be accountable for our forecast track record.

2 For those with some portfolio management experience, a good analogy is that the US creating a strategic Bitcoin reserve is a akin to it being added to your benchmark. Choosing not to hold Bitcoin is, therefore, not a position of neutrality but rather an active decision to be underweight or short.

3 Contrary to common belief Canute was not showing his inability to understand the power of tides but was instead providing to his subjects that he was not omnipotent – humility that many politicians in and out of the EU would do well to adopt.

4 While gold coins and paper bank notes are the most apocalypse-ready forms of money – at least for now – amongst their electronic counterparts Bitcoin is certainly the best for reasons I outlined in a previous note – see: https://trakx.io/resources/insights/crypto-comedown-after-the-high/