Bitcoin falters as optimism wanes on Trump’s crypto reserve plan

Bitcoin backpedaled on Monday after an early rise following US President Donald Trump’s weekend proposal for a national strategic reserve of cryptocurrencies.

Optimism on digital currency after Trump’s Sunday post on Truth Social turned to caution as market participants awaited more details about this crypto initiative.

The world’s largest cryptocurrency, bitcoin, rose 2.4 per cent from Friday’s levels, to $86,292, but was down 8 per cent from Sunday.

Trump’s executive order

Trump said his January executive order on digital assets would create a stockpile of currencies, including bitcoin, ether, XRP, Solana and Cardano. The names had not previously been announced.

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Bitcoin and ether will be at the heart of this reserve, he said in a post on Sunday that sent bitcoin up by a fifth from the November lows. The token has been sliding since mid-January due to disappointment Trump had not followed through on pledges to loosen regulation.

Ether was down 4.3 per cent from Friday’s level, at $2,127.10, but sank nearly 16 per cent from Sunday.

XRP tumbled more than 15 per cent from Sunday’s levels to $2.48, but surged 25 per cent from Friday. Solana also weakened, down 16 per cent from Sunday to $148.89, but was up 1.6 per cent from Friday.

Cardano sank 19 per cent from Sunday to $0.8940, and fell 3 per cent from Friday.

Anthony Pompliano, founder and chief executive officer at Professional Capital Management, and one of the biggest crypto investors, said in a letter to his clients on Monday that he was not in favor of a strategic crypto reserve.

“Even though Solana is our second largest crypto position, and various public equities I hold are heavily correlated to altcoins, I still think this decision on a wide-ranging crypto strategic reserve is an unforced error that will be regretted in the future,” Pompliano said in a letter to investors.

He warned that the emerging policy appeared to be “a random smattering of speculative tools that will enrich the insiders and creators of these coins at the expense of the US taxpayer.”

Cameron and Tyler Winklevoss, who run the Gemini crypto exchange, said on X, formerly known as Twitter, also expressed concern about the reserve. They noted that only bitcoin meets the bar for a store of value as a reserve asset, but were not sure about the other cryptocurrencies.

Trump’s strategic reserve: A positive sign for the crypto industry

Still, Trump’s promise of a strategic reserve has generated excitement for the crypto industry, which has languished in recent weeks.

Bitcoin fell more than 17 per cent in February, its biggest monthly percentage fall since June 2022. It lost more than a third of its price since topping $105,000 in early January.

Its rally since Trump’s November election was spurred by optimism that he would champion a strategic bitcoin fund and end former President Joe Biden’s crackdown.

“Ironically, a currency that was designed to be isolated from government interference and decentralized, is now reliant on the US government for its fortunes,” said Kathleen Brooks, research director at XTB, reiterating that the $100,000 level was an “obvious target” for bitcoin.

Beyond a flurry of appointments of crypto-friendly officials when Trump took office, there has been little concrete news so far around that policy for investors.

IG market analyst Tony Sycamore wrote that the Trump announcement has raised concerns.

The funding for cryptocurrency purchases in the reserve could come from US taxpayers. But alternatively, they could come from cryptocurrencies seized in law enforcement actions, he said, which “isn’t anywhere near as bullish as it simply represents a transfer between accounts rather than new buying entering the market.”