Donald Trump lit a spark under cryptocurrency prices when he said the US was looking into building a strategic reserve of digital assets.
Bitcoin jumped as much as 10 per cent, reversing a month of declines, after the US president made his announcement on his Truth Social social network on Sunday.
But it was his namechecking of lesser-known coins XRP, solana and cardano for inclusion in the potential reserve that fuelled the biggest gains, with Ada — which represents the cardano blockchain — soaring 71 per cent.
Trump said a reserve would “make sure the US is the Crypto Capital of the World”. Solana Labs and Ripple Labs, which developed their eponymous tokens, are based in the US while cardano’s driving force, Charles Hoskinson, is an American based in Colorado.
What are these tokens?
Of the three lesser-known coins, XRP is the oldest, created in 2012 by Ripple Labs for cross-border payments between businesses and financial institutions, with faster transaction times than bitcoin. It is the third largest coin by nominal market value, behind bitcoin and ethereum, at $151bn.
However, Ripple has been fighting a long-running case, which began during Trump’s first term, against the US Securities and Exchange Commission over the legal status of its tokens.
Solana has also touted itself as an alternative to bitcoin, but uses less energy and is better equipped to cope with a much larger number of transactions per second. The solana blockchain is the most popular platform for memecoins, including the ones launched by Trump and his wife Melania in January. The solana token’s nominal value of $80bn makes it the world’s eighth largest cryptocurrency.
Ada, named after the 19th century British computer pioneer Ada Lovelace, is the token representing cardano. It is worth a nominal $33bn, making it the ninth largest cryptocurrency. It was developed in 2015 by Hoskinson, who co-founded the Ethereum blockchain but left after a dispute with other founders. Hoskinson also expressed his concerns about World Liberty Financial, the digital assets platform promoted by Trump and his sons.
Do they have links to Trump’s team?
Many of Trump’s closest advisers and choices for key policy and regulatory roles have links to the cryptocurrency industry. David Sacks, the White House’s artificial intelligence and cryptocurrency tsar, said on Sunday he had sold all of his crypto holdings, including bitcoin, ether and SOL, before the inauguration in January.
But some of the developers of XRP, solana and cardano, as well as some notable holders, have built links with the Trump team as the president campaigned and then prepared to take office.
Ripple donated to the fund for Trump’s inauguration in January, pledging $5mn in XRP tokens, while Brad Garlinghouse, Ripple’s chief executive, went to Washington for the swearing-in ceremony. Ripple and Garlinghouse were also among the biggest contributors to Fairshake, the Super Pac that spent $135mn during last year’s election campaign backing crypto-friendly candidates. On social media site X, Garlinghouse said he “appreciated the crypto president’s vision of a govt digital asset reserve representative of the industry”.
The co-founders of solana — Anatoly Yakovenko and Raj Gokal — have kept a lower political profile. However, one of solana’s biggest financial backers has been a16z, the crypto arm of venture capital group Andreessen Horowitz. It participated in a 2021 fundraising by Solana Labs of $314mn of tokens, alongside Alameda Ventures, Sam Bankman-Fried’s former trading venture.
The a16z business also holds an unspecified amount of solana and has financially backed Ripple. Co-founders Marc Andreessen and Ben Horowitz donated $2.5mn to Trump’s election campaign last summer while a16z’s former global head of policy Brian Quintenz has been nominated by Trump to be the next head of the Commodity Futures Trading Commission.
Hoskinson has advocated clearer industry regulation in the US, discussed potential future policies with senators and hinted in January that he had met Trump at Mar-a-Lago. “It’s a good day . . . you’ve got to have some true grit to be in this industry,” he said on Sunday.
Was Trump’s announcement expected?
Trump signed an executive order in January to explore the creation of a “national digital assets stockpile”, based on crypto seized by law enforcement authorities.
But Sunday’s social media post went further than expected, talking about a strategic cryptocurrency reserve. Although the president had spoken in vague terms in the past about building a reserve, most people in the industry assumed it would mainly consist of bitcoin.
“This is because the bar for what qualifies as a store of value is extremely high and historically limited to precious metals. Other major assets like Ethereum, Solana and XRP do not currently meet this threshold,” said analysts at Sygnum Bank in a report published just before Trump’s post.
Analysts point out that the market values of solana, XRP and cardano are largely based on investor speculation, rather than because they were platforms for building decentralised finance.
While bitcoin can claim to offer “hedging against long-term currency debasement”, according to Andrew O’Neill, digital assets managing director at S&P Global Ratings, other tokens do not.
“In contrast, Ether and Solana focus on tech platform adoption, while Cardano and XRP are more speculative due to lower adoption.”
Why now?
At the end of this week the White House will host its first cryptocurrency summit to discuss future policies. It will be hosted by Sacks and include prominent industry executives, investors and members of the president’s working group on digital assets.
Trump’s announcement could therefore provide a well-timed boost for the sector.
“February was the worst month for bitcoin since June 2022, a pretty bad look for the new pro-crypto administration,” said Geoff Kendrick, an analyst at Standard Chartered.
After Trump’s announcement “it was the best weekend since January 2021. The timing means expectations going into Friday will be for something concrete,” he said.
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