Summary The establishment of a US Sovereign Wealth Fund and a Strategic Bitcoin Reserve under President Trump is a significant move towards institutionalizing digital assets. David Sacks, appointed as 'Crypto & AI Czar,' divested from Bitwise's Crypto Index Fund to avoid conflicts of interest, fueling speculation about the government's crypto reserve plans. Despite initial speculation, the exact cryptocurrencies included in the reserve were Bitcoin, Ethereum, Ripple XRP, Solana, and Cardano, leading to mixed investment outcomes. The executive order restricts the government from significantly impacting the Bitcoin market and mandates budget-neutral strategies for acquiring additional BTC. This has led to a let-down of expectations, which may fuel further short-term losses in the crypto market, but may be a positive in the long run. Introduction Over the last few months, politics have caused volatility to rise . This is especially true over the last two weeks. Much of this volatility has to do with the uncertainty around certain assets that were caught up in the 'Trump Trade,' or assets that were popular with now-President Trump on his campaign trail. Bitcoin was a large part of the Trump Trade. On the campaign trail, in late September 2024, Trump posted: X (Twitter) The world began to speculate on what cryptocurrencies would make the list for this kind of project, and who would decide its form. The Crypto Czar Skip to December 2024 with the appointment of David Sacks as 'Crypto & AI Czar,' or the lead advisor to the President on matters of cryptocurrencies and AI. Sacks is notable for a few things, like being one of the founders of PayPal ( PYPL ). Also notable is that since 2017, he has been running a venture capital firm called Craft Ventures. It, alongside Sacks himself, were first-round investors in Bitwise's Crypto Index Fund (BITW), (that I gave a sell rating to recently), which now trades on the OTC market. It is an actively managed fund diversified across several cryptocurrencies. Sacks and his firm invested in 2017 in this fund when it was a private vehicle. Craft Ventures and Sacks have both divested from the Bitwise fund since January 2025, presumably before President Trump was inaugurated, to avoid conflicts of interest. This fueled speculation that the government really would go through with a crypto reserve fund, and that Sacks was needing to divest from this exactly because he would be doing activities that would promote them in his new role as Crypto Czar. Craft Ventures Possible Inclusions Looking at Bitwise's fund, we can identify what assets Sacks may advise a crypto stockpile to invest in; we are effectively looking at what he was invested in with his own money. Here are all the holdings above 1% NAV in BITW. Bitwise Immediate suspects for a digital asset stockpile are Bitcoin ( BTC-USD ), Ethereum ( ETH-USD ), Ripple XRP ( XRP-USD ), Solana ( SOL-USD ), and Cardano ( ADA-USD ). These are not necessarily the top cryptocurrencies by market weight, for the record. I discuss that further in my article on BITW , but I won't go into any further for our purposes here. What's important to note from this is that speculators have been buying up these cryptocurrencies in advance of several key announcements post-inauguration that would boost these assets. The 1st Batch of Executive Orders Skip to January 2025, when President Trump is in office. He signs two executive orders, one creating a US Sovereign Wealth Fund ('SWF'), and another creating a committee to work on a 'digital asset stockpile.' In an article I published last month , I discussed the potential for a positive price impact on Bitcoin from this move, and other cryptocurrencies that are added to the stockpile. Specifically, I speculated: I wouldn't put it far off for a US-based SWF with this current administration to tangle itself up with [ this order ] and help with establishing said stockpile. The US already has significant Bitcoin reserves, which it has seized from criminals. While the US has already auctioned off and returned much of its reserves, the government still has over 100,000 BTC in its possession, which represents over $9B in assets. To make this more substantial as a strategic reserve, it would stand to reason that the government, either through the SWF or through the treasury directly, would buy Bitcoin. Since then, we've gotten more clarity on what digital assets would be included, dissipating much of the speculation surrounding Sacks and Bitwise. On March 2nd, President Trump posted about the exact currencies that would be in the reserve: Truth Social Since Sacks was confirmed in December, if you had picked up on the investment in BITW (I did not, for the record), the various cryptocurrencies have been mixed. This has been disappointing for investors. Data by YCharts It was interesting to see it play out, as President Trump's messages named the exact top five holdings of BITW. Yet, despite the spike from the initial rush after the post on March 2nd, the assets are still relatively depressed. The 2nd Batch of Executive Orders On March 6th, President Donald Trump signed a follow-up executive order to the order that established a Digital Asset Stockpile committee. It was now time for that committee to act. The order was titled: ESTABLISHMENT OF THE STRATEGIC BITCOIN RESERVE AND UNITED STATES DIGITAL ASSET STOCKPILE Here is what the order authorizes Treasury Secretary Scott Bessent to do: ...establish an office to administer and maintain control of custodial accounts collectively known as the "Strategic Bitcoin Reserve," capitalized with all BTC held by the Department of the Treasury that was finally forfeited as part of criminal or civil asset forfeiture proceedings... ...establish an office to administer and maintain control of custodial accounts collectively known as the "United States Digital Asset Stockpile," capitalized with all digital assets owned by the Department of the Treasury, other than BTC, that were finally forfeited as part of criminal or civil asset forfeiture proceedings... ...develop strategies for acquiring additional Government BTC provided that such strategies are budget neutral and do not impose incremental costs on United States taxpayers. However, the United States Government shall not acquire additional Stockpile Assets other than in connection with criminal or civil asset forfeiture proceedings or in satisfaction of any civil money penalty imposed by any agency without further executive or legislative action. Immediately, I understand why all the hype is gone. The specific wording of the act essentially orders the Treasury Secretary to collect all the Bitcoin and other assets already owned by the US in its stockpiles of seized assets and rename it into the Strategic Bitcoin Reserve. This explicitly does not authorize the purchase of any Bitcoin at all. It does do something, which is that it stops the sale of any more Bitcoin or other assets out of the US accounts, which were previously being auctioned. It should be of note that basically all financial assets seized by the government end up at auction, to allow the government to recoup some money from criminal activities that they seized the assets from. This order disallows future auctions of seized Bitcoin, leaving the government's approximately $9B stockpile stagnant. The order only authorizes the assets to come from particular channels; seizures and forfeiture. This is in no way is what the market expected. The initial narrative had been all about the US investing in cryptocurrencies, not necessarily just holding on to existing stores. This was a neutered version of what was expected, and has not corrected the downturn since the highs of late January. Digital Asset Summit Fast-forward to the most recent update, on March 7th, where President Trump was speaking at the White House Digital Asset Summit, put together by David Sacks, the Crypto & AI Czar. Not much of substance pertaining to the fund itself was mentioned, but here are some of the main points President Trump and his cabinet made at the address: The US government will stop all sales of crypto assets, in favor of holding them instead. This will be funded through the existing stockpile. The Treasury will work toward deregulating cryptocurrency more broadly. They are primarily concerned with stable coins. The Strategic Bitcoin Reserve will not be at the cost of taxpayers. None of this seemed particularly bullish for the price of the coins, and definitely not for the alt-coins mentioned earlier, like SOL and ADA. Ultimately, I see this as being bullish for cryptocurrency-based business more than anything. The biggest winner at the summit was not someone who spoke, but someone who was there: Brian Armstrong. He is the CEO of Coinbase ( COIN ), one of the world's largest cryptocurrency exchanges. He remarked : [Emerging regulatory clarity] is directly translating to economic growth in the U.S. For instance, Coinbase plans to hire about 1,000 employees in the U.S. this year as a result of this renewed growth. The more normalized crypto is within financial markets, and the easier it is to do business in crypto, the more money exchanges like COIN make. This may not impact the price of Bitcoin very much, which is largely dictated by speculation and less by fundamentals like how much traffic the network sees or how much money is tied up on exchanges. Conclusion Ultimately, it looks a little foolish in hindsight to have bet on the government, being as irresponsible as to speculate on cryptocurrencies through direct investments. Instead, the cryptocurrency market has fallen despite all the news and buzz around the Strategic Bitcoin Reserve. It seems that this wasn't the play, at least not in the short term, despite the positive backing from the new administration. For now, it seems like the best investment is to stay with Bitcoin alone or to invest in Bitcoin-adjacent companies like Coinbase, who will benefit from the new regulatory environment, and to ignore the noise from politics. While initially promising, the ideas that were presented on the campaign trail have not resulted in the paradigm shift that many investors were pricing in back in January. For this reason, I would not advise betting on the proposed alt-coins for the Digital Asset Stockpile. They are unlikely to see any market influence from this move by the government. It's now more clear from the latest developments that the administration is not coming to buy anything from the marketplace, and is not going to put any positive pressure on the cryptocurrency market. While the lack of US government auctions may be a positive for markets, since it reduces supply, it may not be enough to deeply influence the crypto market. These coins may continue to fall despite positive developments toward this project. Currently, I am getting my Bitcoin exposure through MAXI . I am still long Bitcoin, but I have limited my exposure and monitor it closely. I suggest investors do the same at the current moment. Thanks for reading.
