Trump’s Mention of XRP, ADA and SOL May Be Bait to Secure BTC, ETH Reserve

The Art of Negotiation in Cryptocurrency Reserves

The negotiation strategy often summed up as "ask for 1,000 to settle at 500" finds its way into the world of crypto as U.S. President Donald Trump, leveraging his real estate acumen, sets ambitious expectations for a proposed strategic reserve of digital assets, including major cryptocurrencies like Bitcoin (BTC) and Ethereum (ETH).

On a recent post on Truth Social, Trump announced his hopes for the inclusion of payment-focused cryptocurrencies, namely XRP, SOL from Solana, and Cardano’s ADA, alongside BTC and ETH as part of this strategic reserve. This announcement sent shockwaves through the market, with the total cryptocurrency market cap surging by 11%—around $300 billion—bringing it to $3.09 trillion.

However, the initial excitement was short-lived, as market sentiment shifted the following day. Critics emerged, questioning Trump’s understanding of these cryptocurrencies and their roles within a national reserve context. The reaction underscores the intricacies involved when introducing altcoins into national strategic discussions and the required Congressional approval for any significant financial moves.

Jeff Park, head of alpha strategies at Bitwise Investment Management, expressed concern regarding the optics of including relatively nascent cryptocurrencies. "Big problem here is optics. When you include altcoins whose use case is too nascent to be deemed ‘nationally strategic,’ you risk the assumption of inside dealing," Park noted, highlighting the potential political backlash even among crypto enthusiasts.

This perspective suggests that Trump may indeed be employing a classic negotiating tactic by presenting a broad list of assets—some with questionable utility in financial markets—to create leverage in debates with Congress. Ilan Solot, senior global market strategist at Marex Solutions, posited that declaring a strategic reserve with lesser-known cryptocurrencies might simply be a strategic maneuver to bolster support for Bitcoin while potentially sidelining requests from other altcoins.

Adding to the conversation, Solot remarked that while the U.S. could maintain a stockpile of digital assets, the likelihood of government purchases of fresh BTC sits below 50%, with ETH purchases seen as possible yet limited, leaving altcoins with minuscule chances of inclusion.

Critics also emphasize the insufficient real-world applications of tokens like XRP and ADA compared to cryptocurrencies such as Ethereum and Solana, which have demonstrated active utility in financial activities through stablecoins. Additionally, the ongoing absence of futures for XRP and ADA on key exchanges like the CME might hinder their acceptance as strategic reserves.

Market analyst Jason Atkins from Auros outlined the typical market response to Trump’s announcements, suggesting it unfolds in three phases: initial rumors, a hyperbolic announcement, and then tough negotiations. He cautioned investors to remain vigilant, as the prospect of misalignment with Congressional approval poses a significant risk, hinting at potential market corrections as investors reassess the realities of bureaucratic processes.

Atkins observed that the negotiations surrounding strategic investments create a cyclical dynamic intertwined with speculation-driven volatility, urging market participants to differentiate between substantive shifts and mere speculation.

In sum, as Trump’s strategy unfolds, it remains to be seen how this negotiation will play out and what it might mean for the broader landscape of digital currencies within the political and economic framework of the United States.