Bitwise CIO: Market Misunderstood Trump’s Crypto Reserve Plan, Calls for Bullishness

When Trump first unveiled his plan for a crypto reserve, the digital asset market reacted with immediate enthusiasm. We saw Bitcoin (BTC) jump by 6.81%, Ethereum (ETH) climb 10%, and other prominent cryptocurrencies like XRP, Solana (SOL), and Cardano (ADA) soar by 15%, 25%, and an impressive 70% respectively, all from the lows of the previous week.

However, this initial excitement proved short-lived. The gains evaporated quickly as Bitcoin experienced a more than 10% drop, and ETH slid over 15%. This market correction came on the heels of Trump’s subsequent announcement regarding tariffs on goods from Canada, Mexico, and China.

This rapid turnaround was reminiscent of the volatile Bitcoin rally and crash seen under President Xi back in 2019, but this time, the market shift happened even more rapidly.

Hougan: Only Bitcoin Reserve Could Be More Bullish

In a note shared with clients, HouganPinpointing the reason for the market’s reversal, Hougan pointed suggested that the market’s reaction might have been an overreaction. He argued that the inclusion of various cryptocurrencies in the proposed reserve, rather than focusing solely on Bitcoin, might be why the market faltered.

“If the reserve was focused purely on Bitcoin, we’d likely be seeing even higher prices,” he commented. Hougan also raised questions about the inclusion of assets perceived as more speculative, like Cardano, describing it as “more of a calculated move than a truly strategic one.”

Bitwise CEO Hunter Horsley echoed these sentiments, aligning himself with other industry leaders who advocate for a Bitcoin-centric reserve, such as Coinbase’s Brian Armstrong and the Winklevoss twins.

“My initial thought was that a strategic reserve would logically consist only of Bitcoin. That seems to make the most sense,” Horsley explained. “While many crypto assets hold value, we need to remember this isn’t about creating a diverse investment portfolio. It’s about establishing a reserve, and in the digital age, Bitcoin stands alone as the undisputed store of value.”

Key Questions: Financing, Execution, and Political Viability

The announcement has certainly sparked a lot of interest and optimism, but crucial uncertainties still linger. The most pressing questions center around the financial backing of this reserve and the practical steps needed to implement it, particularly whether it can proceed without new legislation from Congress.

“To move forward with this, the Federal Reserve and the Treasury Department would likely require new legal authorization from lawmakers,” Hougan pointed out. He further noted that there are legitimate questions about the feasibility of the plan in the immediate future.