President Donald Trump's comments over the weekend about a U.S. strategic crypto reserve led to extreme volatility in the sector with many cryptocurrencies surging following the news and then pulling back this morning.
Since the late afternoon yesterday, the price of the meme tokens Dogecoin (CRYPTO: DOGE) and Shiba Inu (CRYPTO: SHIB) had fallen 5.7% and 6%, respectively, as of 9:46 a.m. ET today. However, over the last 24 hours, Dogecoin is up nearly 9%, while Shiba Inu is up 3.5%. Meanwhile, the price of Cardano (CRYPTO: ADA) is down 7.4% since the late afternoon, but has exploded over 51% higher over the last 24 hours.
Trump names specific cryptocurrencies in reserve
While Trump had already passed an executive order directing officials to explore the idea of a national strategic crypto reserve, the details were a bit scant and left investors wondering which cryptocurrencies might be part of the reserve. On March 2, Trump named five cryptocurrencies including Bitcoin, Ethereum, XRP, Solana, and Cardano, adding that Bitcoin and Ethereum would be "... at the heart of the Reserve."
The idea behind a strategic reserve would be to stockpile certain cryptocurrencies that the U.S. government could use to deal with supply and demand imbalances or if some kind of economic hardship or emergency occurs. The U.S. has a Strategic Petroleum Reserve that can be used if there is a disruption to the world's or country's oil supply. Many are still uncertain over what the actual impact of a U.S. strategic crypto reserve would be.
"This move signals a shift toward active participation in the crypto economy by the U.S. government," Federico Brokate of the asset management firm 21Shares said, according to Reuters. "It has the potential to accelerate institutional adoption, provide greater regulatory clarity, and strengthen the U.S.'s leadership in digital asset innovation."
Reuters also reported that James Butterfill, head of research at CoinShares, said the announcement of the five cryptocurrencies caught him by surprise and "... suggests a more patriotic stance toward the broader crypto technology space, with little regard for the fundamental qualities of these assets."
Bitcoin and Ethereum are the two heavyweights of the sector. Trump has also held meetings with Brad Garlinghouse, the CEO of Ripple, the company behind XRP. The $Trump token runs on Solana's network. However, there didn't appear to be a clear connection between Trump and Cardano prior to the announcement, which may explain the token's outperformance in that investors didn't expect Cardano to be included. Prior to the announcement, Cardano had amassed gains of close to 95% since Trump won the election, very impressive but not the strongest performer either.