Bitcoin and Ether Rise Following Trump’s Cryptocurrency Reserve Proposal
New York, March 3 (Reuters) – In the wake of U.S. President Donald Trump’s weekend announcement regarding a proposed national strategic reserve of cryptocurrencies, Bitcoin and Ether initially showed a surge in value, although trading dynamics quickly shifted towards caution among market participants.
A Mixed Reaction to the Proposal
President Trump announced through his social media platform, Truth Social, that his executive order from January would aim to build a reserve comprising various digital currencies, prominently featuring Bitcoin and Ether. Following this announcement, Bitcoin experienced a brief uptick of 2.4%, reaching $86,292, although this marked an 8% decline from the previous day’s closing prices. Ether reported a decline of 4.3% from Friday, landing at $2,127.10, and it recorded a steep 16% drop from Sunday levels.
The proposed reserve would also incorporate other cryptocurrencies such as XRP, Solana, and Cardano, which had not been previously mentioned by the administration. While Bitcoin and Ether are touted as the foundation of this initiative, the market remains skeptical as participants eagerly await more concrete details about the feasibility and implications of such a reserve.
Diverging Opinions Among Experts
Industry reactions have been varied. Anthony Pompliano, founder and CEO of Professional Capital Management and a vocal advocate for cryptocurrencies, voiced his concerns over the proposed strategic reserve in a letter to investors. Pompliano expressed skepticism regarding the decision, stating that it could potentially disadvantage U.S. taxpayers by benefiting the entities behind these speculative assets. He characterized the proposal as an "unforced error" and predicted it would lead to regrets in the future.
The Winklevoss twins, Cameron and Tyler, who operate the Gemini cryptocurrency exchange, echoed similar sentiments. They argued that only Bitcoin qualifies as a reliable store of value among the assets included in the proposal, raising questions about the reliability of the other cryptocurrencies suggested for the reserve.
Market Volatility Amid Strategic Proposals
Despite the excitement surrounding Trump’s announcement, the cryptocurrency market has faced notable volatility. Bitcoin recorded its largest monthly percentage drop in February, plummeting over 17%, shedding more than a third of its value since reaching highs above $105,000 in early January. Analysts consider the price targets and the market’s reliance on potential governmental policies indicative of a growing interdependence between cryptocurrencies and U.S. government actions.
Kathleen Brooks, research director at XTB, pointed out the irony in a digital currency’s reliance on government initiatives, noting it contradicts the foundational principle of cryptocurrencies being decentralized and insulated from governmental control. She highlighted that reaching the $100,000 mark for Bitcoin is still a feasible goal, reflecting ongoing market speculation.
Future Implications for Cryptocurrency Funding
Concerns have also emerged regarding the funding mechanisms for the proposed cryptocurrency reserve. IG market analyst Tony Sycamore suggested that the resources could derive from U.S. taxpayers or potentially be sourced from cryptocurrencies seized in law enforcement actions. Such funding sources—if confirmed—would not necessarily instill optimism in the market, as they would simply move existing assets rather than infuse new capital.
As the cryptocurrency landscape continues to evolve, market participants remain vigilant, watching for further concrete developments from the Trump administration regarding his proposed reserve and its potential impact on the broader crypto market.
Reporting by Gertrude Chavez-Dreyfuss in New York, Vidya Ranganathan in Singapore, and Kevin Buckland in Tokyo; Additional reporting by Yadarisa Shabong and Lisa Mattackal in Bengaluru; Editing by Amanda Cooper, Bernadette Baum, and David Gregorio.
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