On Thursday evening, President Trump signed an Executive Order creating a Strategic Bitcoin Reserve (SBR) and a digital asset stockpile.
Like many of the administrative initiatives, this one went through a couple of iterations before the final version - initially a SBR floated at the Bitcoin 2024 conference, then a “digital asset stockpile” in the initial crypto EO issued after inauguration, then a social post last Sunday from the president stipulating a “US Crypto Reserve” including BTC, ETH, XRP, SOL, and ADA to now the recent EO, which stipulates both a SBR and a digital asset stockpile.
The order stipulates that the SBR and the stockpile would be formed from digital assets already controlled by the US government through civil forfeitures from various criminal cases over the years. For bitcoin, these stem from Silk Road and related forfeitures and the hack of Bitfinex. We did some analysis around this before - it hasn’t changed. No coins have been sold recently and nearly half the US government’s bitcoins come from the hack of Bitfinex.
No net purchases of other digital assets would occur, except potentially for bitcoin if it could be done in a budget-neutral way. The digital asset stockpile would consist of other digital assets obtained by civil forfeiture that could be held or earmarked for disposal. According to Arkham Intelligence, the US presently controls no XRP, SOL, or ADA, making Sunday’s social post, which sent prices skyrocketing (ADA was up over 60%) a bit perplexing. The US currently controls USDC ($122M), ETH ($121M), WBTC ($66M), BNB ($24M) as well as smaller amounts of other coins.
The fact this came through an EO rather than a law, like the BITCOIN Act from Senator Lummis, makes it much less permanent. EOs can be easily undone by the next administration, making the next election something of a sword of Damocles hanging over the price of bitcoin. We won’t have to worry about the US government selling its bitcoin stash, but only in the next 4 years. Still, we see the EO as supportive of the broader digital asset industry, and it gives bitcoin a special place within the ecosystem.
Dispelling Stablecoin Myths as Issuers Jockey for Position
With stablecoin regulation actively in the works by legislators, issuers are jockeying for position. Sparring in the press are the issuers of the two largest stables coin, Circle, issuer of the USD Coin (USDC) and recently Tether, issuer of the tether (USDT) stablecoin. Circle is a US based company, while Tether recently incorporated in El Salvador.
Stablecoins Are All the Same
Stablecoins come in a variety of styles, the most popular of which is off-chain reserved. Both USDC and USDT are of this style - their backing is in assets held in bank and brokerage accounts and coins are issued on a per dollar basis. On-chain reserve style is the second most popular, like DAI. Assets, like ETH, are locked up in a smart contract and a synthetic stablecoin issued against that asset. Algorithmic is the final category where a stablecoin’s value is typically balanced by another token endogenous to the system, which is minted and burned. UST (backed by LUNA) was a leading example of an algorithmic stablecoins, but the category has fallen out of favor with its collapse.
Stablecoins are Pegged
We saw this error in the stablecoin legislation and it’s a big one. There’s no “peg” typically for stablecoins, just a market price. It’s kept near $1.00 because of market forces. Arbitrageurs can buy the token at a discount and put it back to the issuer for the exact dollar value. They can also short it at a premium to $1.00, take the cash proceeds to the issuer, and have it issue a commensurate number of coins, covering the short. Again, to call it a “peg” is false and misleading for most stablecoins.
Stablecoins are a Single Asset
Even though we call the stablecoins “USDC” or “USDT” they are really a collection of digital assets issued on different blockchains. USDC is a set of 18 assets on different networks while USDT is 17 tokens on different networks. Calling them one digital asset, while helpful in describing the broad set of assets under one issuer, is not correct.
Stablecoins are Decentralized
There’s nothing decentralized about on-chain reserve stablecoins like USDT and USDC. They have a central issuer, Tether and Circle, which have the authority to mint, burn, and freeze tokens. This is very different from something like Bitcoin, which has no central operator.
Market Update
Bitcoin rallied 6.8% in a week that was not without its volatility. Bitcoin and the digital asset markets got a significant lift on Sunday morning with President Trump’s social posts about the strategic crypto reserve but did a 180 on Monday as markets sold off with the jockeying around tariffs. News of the White House crypto roundtable lifted prices later in the week culminating with the Executive Order on the SBR and the crypto stockpile.
With the SBR catalyst behind us now, the next major catalysts are legislative and regulatory developments. The OCC came out today clarifying statements around banks and crypto related activities as a prime example. Many of the rest of the changes will be evident in the coming weeks and months, which all should be supportive of the industry.
Mar 12 - CPI release Mar 19 - FOMC interest rate decision Jul 2 - Final SEC deadline for decision on GDLC ETF conversion Jul 22 - EO Working Group report deadline
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