In This Article
U.S. President Donald Trump in the evening on March 2 announced that his administration should "move forward" on creating a strategic reserve of digital assets including Solana (SOL), Ripple's XRP and Cardano (ADA).
It wasn't until about two hours later that Trump noted that the reserve would include Bitcoin, Ethereum and "other valuable crypto assets,". The announcement led to a resonance in the crypto market, and also coincided with a general rise in crypto asset prices.
XRP Market Dynamics
By Monday morning, the overall capitalization of the crypto market had risen by around 12%.
Bitcoin and Ethereum prices were up about 7%, SOL and XRP quotes were up 18%, and the price of ADA was up nearly 60%.
Trump's announcement also drew criticism from many experts in terms of asset selection.
By the morning of 4 March, according to Coinmarketcap, the digital asset market has lost all of its growth and is even below the marks prior to Trump's reserve announcement.
As of 9:35 a.m., the crypto market capitalisation had plunged 13% to $2.77 trillion, with bitcoin and Ethereum prices losing 9% and 13% over the past 24 hours. Quotes of SOL fell by 14%, XRP - by 17%, ADA - by 20%. Of the 100 largest cryptocurrencies by capitalisation, only one - Pi (PI) - rose, with a 4% increase.
The US president's announcement to add three more cryptocurrencies to the future crypto reserve reflects a growing trend among investors to diversify their portfolios, said for Fortune the head of research at asset management firm Grayscale, Zach Pandl:
"We're incredibly excited about the prospects for bitcoin and its adoption, but the crypto asset class is more diverse. We constantly hear feedback from investors interested in diversifying for the same reason they are interested in diversifying into any other asset class."
Creation of a U.S. crypto reserve based on XRP
President Trump's executive order aims to make the United States a leader in blockchain and digital assets.
Among its key points is a proposal to create a strategic crypto reserve that prioritizes US-developed assets such as XRP, Solana and USDC.
Ripple CEO Brad Garlinghouse has been a strong supporter of the initiative. He argued that supporting U.S. blockchain projects is in line with the administration's goals of fostering domestic innovation and strengthening the economy.
Garlinghouse also cited XRP's utility in cross-border payments as a key reason for its potential inclusion in the reserve.
Ripple has stepped up its lobbying efforts to push for XRP's inclusion in the proposed reserve. The company has met with lawmakers, regulators, and even President Trump himself to argue that XRP is a strategic asset.
Ripple's arguments are simple: XRP offers a faster and more energy-efficient alternative to bitcoin for transactions, making it an ideal choice for a government-backed digital asset reserve.
However, this stance has drawn criticism from bitcoin maximalists, who accuse Ripple of undermining bitcoin's dominance in the cryptocurrency space.
Bitcoiners respond
Bitcoin supporters have fought back hard against Ripple's lobbying efforts. Pierre Rochard, a prominent bitcoin advocate, criticized the centralization of XRP and argued that Ripple's participation in the ecosystem gives the company excessive control.
Rochard and others have also pointed to Ripple's pre-mining of XRP and its control over a significant portion of the supply as evidence of the lack of decentralization that defines Bitcoin.
This ongoing feud between Ripple and Bitcoin maximalists only adds to the drama surrounding the strategic reserve proposal.
The economic arguments in favor of XRP
If XRP is included in the U.S. cryptocurrency reserve, it could have significant implications for its price and the economy as a whole. A government-backed reserve would not only increase confidence in XRP, but also increase demand, potentially leading to an increase in its value.
Why XRP makes sense to use as a reserve
XRP's fast transaction times and low cost make it an attractive option for cross-border payments, which is a key option for digital currencies in a government reserve.
Unlike bitcoin, which operates outside of a national framework, XRP was developed by a U.S. company. Support for XRP is consistent with the administration's focus on promoting American technology.
A reserve that includes multiple digital assets, not just bitcoin, provides the government with greater flexibility and reduces reliance on a single cryptocurrency.
However, including XRP in a national reserve is not without its challenges. Critics argue that Ripple's significant exposure to XRP could raise questions about centralization and control.
Ripple vs Bitcoin: the feud is intensifying
The idea of an XRP-backed reserve has further deepened the rift between bitcoin maximalists and Ripple supporters. Bitcoin supporters see the proposal as a threat to bitcoin's dominance, while the Ripple camp sees it as an opportunity to showcase the potential of XRP.
One of the main points of contention is the centralization of XRP. Critics argue that Ripple's control over key aspects of the XRP Ledger, such as the unique node list (UNL), undermines its claims of decentralization.
Ripple CTO David Schwartz has come out in defense of XRP, saying its structure prevents manipulation and ensures the integrity of transactions. Bitcoin supporters such as Roshar, however, remain unconvinced, arguing that Ripple's influence is a “massive conflict of interest.”
The feud between Ripple and Bitcoin goes beyond technical arguments. It's a clash of ideologies: bitcoiners favor decentralized, community-driven innovation, while Ripple favors a more corporate, regulated approach.
This cultural divide reflects the broader challenges the crypto industry faces as it strives for mass adoption.
Impact of Digital Currencies on Central Banking
When the government announces that it will start buying cryptocurrencies for the state reserve, the markets react instantly. The effect was similar to if the government decided to buy a huge stockpile of gold - the price immediately jumps due to the frenzied demand. In the first hours after the news, the bitcoin exchange rate rose more than 10 per cent to over $94 000.
Ethereum (the second largest cryptocurrency) rose by about 12%. The altcoins that were explicitly mentioned for inclusion in the reserve soared even more markedly: for example, the price of Cardano (ADA) jumped by more than 50-70%, XRP by ~30%, and Solana (SOL) by about 20%.
In other words, the government-named coins added as much in a matter of hours as they typically grow in months of trading. According to CoinGecko, the combined capitalisation of the entire crypto market rose by around $300 billion (around 10%) in just a few hours after the announcement - a rise that affected not only the selected coins, but the sector as a whole, thanks to increased optimism.
Why have prices soared so much? Firstly, the principle of supply and demand kicks in. The amount of bitcoins and other crypto coins is limited, and if a large buyer appears (and the U.S. government is a giant in the financial field), supply is quickly exhausted, pushing prices up.
An analogy: imagine that a millionaire suddenly appeared in a small market and bought up tonnes of scarce goods - the remaining buyers got almost nothing, and the price tags instantly skyrocketed.
Conclusion
The proposal for a U.S. cryptocurrency reserve has caused excitement, controversy, and a lot of debate in the crypto community.
Ripple's efforts to position XRP as a strategic asset have drawn both praise and criticism, highlighting the constant tension between the various factions in the digital currency space.
Frequently asked questions
1. What is the proposed US crypto reserve?
The U.S. Crypto Reserve is the government's proposed stockpile of digital assets, including cryptocurrencies like XRP, designed to foster American innovation and diversify the country's digital economy.
2. Why is Ripple pushing to include XRP in the reserve?
Ripple argues that XRP's efficiency, low cost, and U.S. origin make it an ideal candidate for inclusion in the reserve, which is in line with the administration's desire to support homegrown technology.
