8 reasons why it is said that national strategic crypto reserves are a bad idea

Author: Nic Carter, Partner & Coinmetrics, Castle Island Ventures; Translated by: Golden Finance xiaozou

Trump's five cryptocurrency reserve plans will dilute Bitcoin's value proposition and be self-interested - NicCarter

One might think that almost all Bitcoin enthusiasts would be excited about the idea that the U.S. government would include BTC (and perhaps other crypto assets) in its cryptocurrency reserves and essentially recognize it as a global asset of considerable importance. However, I am a minority that is not optimistic about the policy's favorable policy to Bitcoin or the United States itself. Here are eight reasons why I object to this policy.

1. Things that are easy to succeed are also easy to fail

If Bitcoin enthusiasts want to keep their reserves long, they should expect Trump to seek congressional authorization to make a purchase (this is the practice of any large spending). If done solely by executive orders, the next government will not feel policy binding and can easily be removed (and destroy the market in the process). If Bitcoin enthusiasts sincerely believe that inclusion of Bitcoin in reserves and holding them for a long time is beneficial to the United States, they should insist on authorizing reserve spending through laws rather than allowing Trump to unilaterally implement policies.

Many Bitcoin enthusiasts want Trump to develop policies without Congress’ approval, which shows that they are pursuing short-term price increases rather than genuine concern about the long-term value of reserves to the United States. Future Democrats will immediately withdraw their reserves without hesitation.

2. Global reserve currency issuing countries should not be distracted

The United States is the issuing country of global reserve currencies. We are not clear yet how cryptocurrency reserves will be positioned—whether as an investment fund or as a new commodity currency system more inherently related to the US dollar, like the old gold standard.

If cryptocurrency reserves are seen as providing new support for the US dollar, I believe this will cause significant uneasiness in the US dollar and Treasury markets. This is equivalent to the US government sending a signal that it no longer has confidence in the existing dollar system and needs fundamental changes. I think this will lead to a further increase in high interest rates as the market begins to doubt whether the U.S. is considering debt defaults. The U.S. government should consolidate investors' confidence in their ability to maintain debt by implementing policies that promote growth and reduce deficits, rather than playing with the structure of the entire dollar system.

Many Bitcoin enthusiasts do not accept this reasoning and just want to accelerate the collapse of the dollar. I think this is a kind of financial terrorism. I don't believe in financial accelerationism, nor do I think Bitcoin or any other crypto assets are ready to support as a new dollar commodity standard.

3. The United States has held a large number of Bitcoin

U.S. funds and individuals hold more Bitcoin than any other country on earth — almost certainly a large percentage of the way. The United States has benefited from this state. When Bitcoin goes up, those Americans who realize their earnings are subject to taxes to the government—20% or 40% of the earnings, depending on the length of holding.

This is an important point that should not be ignored. The United States has benefited from the rise in Bitcoin through tax revenues — more than any other country. In view of this, we really need to provoke a war and insist that the US government also directly holds these assets? No one has pushed the U.S. to acquire Apple or Nvidia shares. Why Bitcoin?

4. Cryptocurrency reserves have no "strategic" value

Usually, assets and commodities acquired at the U.S. government level are things that may be needed in an emergency and must be accumulated in advance. Oil reserves are a great example because oil is obviously an essential commodity and in a crisis we may not be able to get all the oil we need.

We also maintain other types of strategic asset reserves, such as medical supplies and equipment, rare earth minerals, metals such as helium, uranium and tungsten, and agricultural products. These have a clear purpose: to create a reserve that can be used in emergencies.

We also store foreign exchange in case of the need to interfere in the money market, although these interventions are becoming increasingly rare. Bitcoin (not Cardano or Ripple of course) has no obvious strategic purpose. The average American does not need a “supply” of Bitcoin or any other crypto assets to maintain their quality of life. If the entire financial system runs on the blockchain, we need tokens as fuel (the only similar "industrial" purpose I can think of), it may change, but that's not the current situation. The only “strategic” purpose of Bitcoin is to “go long” the asset at the national level and sell it later, but you can do that with any other financial asset. There is nothing unique about Bitcoin (or any other crypto asset) in this regard.

Of course, if you end up supporting the dollar with Bitcoin in some new gold standard, it will have a strategic purpose (in this case you should refer to point 2). But I don't think this is the current intention.

5. Cryptocurrency reserves dilute Bitcoin’s value proposition

Mixing Bitcoin with competitive crypto assets such as Ethereum, Cardano, Solana and XRP and giving them equal recognition will devalue Bitcoin and make it look indistinguishable from these assets. Bitcoin is the only asset that has a truly decentralized level of trusted supply plans and protocols. Cryptocurrency reserves create chaos and devalue Bitcoin in the eyes of the public. Principled Bitcoin enthusiasts should promote all-or-nothing; either only Bitcoin or no reserves.

6. Bitcoin does not require government

I wonder how early liberal bitcoin enthusiasts in 2012-2016 would see bitcoin enthusiasts in 2025 pushing the government to support their coin value. Besides the confusing ideological evolution experienced by the Bitcoin community, there is another thing to note. Bitcoin has been one of the best performing investments in history, from a tiny value in 2009/10 to a trillion- dollar total value in 2025. It did all this without government support and, in many cases, accompanied by open hostility from several powerful countries. Cryptocurrency reserves will transform Bitcoin from a non-political asset to a government plaything, influenced by the Washington political cycle. Bitcoin enthusiasts have never been people who are dependent on the government and should not be the case now.

7. This will make Americans hostile to Bitcoin enthusiasts

Only a small percentage (about 5-20%) of Americans hold Bitcoin, and even fewer people hold other crypto assets. Many Bitcoin enthusiasts have become very rich due to their historical investments in the coin. Using taxpayer money — no matter how they are allocated — to support the prices of Bitcoin and other crypto assets is politically unpopular at a time when spending is under strict scrutiny. Biden's proposed student loan pardon program has encountered huge resistance, although it may apply to 43 million borrowers. Bitcoin enthusiasts are a smaller group and do not need government financial support. This policy will undoubtedly cause unnecessary hatred for crypto communities in the broader society.

8. Cryptocurrency reserves seem self-interested

It’s no secret that Trump, his cabinet and his core circles hold various crypto assets. Trump himself has launched or participated in: an ETH-based NFT project, multiple Solana-based memecoins, and of course World Liberty Financial, which holds a range of crypto assets. We need Trump to develop a reasonable crypto policy, which he seems to be achieving based on his appointments to the Treasury, the Commerce Department, the SEC, the CFTC, the OCC, etc.

However, it is unpleasant to use resources to directly boost the value of tokens held by Trump (and many in his inner circle). Most of our crypto industry simply demand reasonable policies and fair rules so that we can do business in the United States. Trump's proposal goes far beyond that, using taxpayer's money to speculate on the token itself, which could make himself and his people in the same camp rich.

For Trump’s critics, this is a demonstration of corruption. This also makes Trump's other efforts to support crypto policy formulation and regulation seem selfish and detrimental to make good policies stand on their own. The next U.S. government may choose to negate completely and reverse all the progress the U.S. has made in the crypto field. Cryptocurrency reserves provide moral confirmation for the future era of crypto degradation.