|
|
|
|
(7 Day Change as of March 6, 2025 3:30PM ET)
|
Bitcoin Price: $89,070
7.62%
|
|
DeFi Total-Value-Locked: $97.4B
(0.51%)
|
Ethereum Price: $2,208
(2.52%)
|
|
Crypto Market Cap: $2.92T
5.42%
|
Bitcoin Range: $78,442 - $94,727
|
|
TKN.U Close: $14.10 (as at Mar 5, 2025)
|
Ethereum Range: $2,019 - $2,538
|
|
|
Bitcoin Dominance: 60.30%
1.01%
|
|
|
|
|
|
|
What the Heck is a Strategic Crypto Reserve?
|
While the announcement provided a jolt to markets, that quickly wore off as the administration provided few additional details of how they would fund and manage the reserve. Bitcoin remains higher than before the announcement, but it is hard to untangle the different factors that may be contributing to the recent strength – perhaps a softening of tariff rhetoric, which has helped stocks, is also lifting Bitcoin.
Anyway, what to make of the reserve and is it a good idea? The idea of a strategic reserve for critical assets or commodities is not new. The government maintains strategic stockpiles of gold and petroleum, and governments and central banks maintain large balances of foreign currencies, for example. These are meant to act as a hedge against inflation, a supply buffer in case of crisis or to alleviate price squeezes, and to hedge against currency instability, respectively.
Using that framework, one could argue a strategic Bitcoin reserve makes sense
if you believe Bitcoin will continue to mature into an important commodity and monetary asset that might be widely held by governments, central banks and corporations. There is increasingly enough evidence to support that view.
What about these other names like Solana and Ethereum? Those two platforms are used by many American firms including important companies like Visa and Blackrock. Furthermore, the government may become a user of the technology, meaning they may need to hold some ETH or SOL to pay for transactions and contribute to the governance of the network, by voting and staking their tokens. XRP and ADA likely got the nod because they’re “American-made” projects that have effectively lobbied the Trump administration. Is that enough to justify the inclusion of these four other assets?
One could argue a crypto reserve, while early, helps to future-proof the government and signals to the country they’re a model user of new technology, akin to the Federal Government in the 1990s launching their own webpages to show they were tuned in. I think that’s a generous interpretation. I think this raises some troubling questions. Was the administration doing a solid for crypto businesses and investors who were big donors to the campaign? Is the government implicitly (or explicitly) picking winners by elevating these blockchains at the expense of others? Will the Trump administration use taxpayer money to buy some of these assets, which are still speculative and sometimes volatile? I hope not.
Responding to the market’s mixed reaction to the news, Commerce Secretary Howard Lutnick tried to clarify things on Wednesday, saying that the administration will provide more details on Friday, adding that the crypto reserve is now a “strategic Bitcoin reserve,” with other tokens being treated “positively but differently.”
Putting aside these criticisms, this much is obvious: regulatory headwinds are now tailwinds. Confusion around the reserve notwithstanding, this administration has done some things right on the crypto issue:
5)
Announced the creation of a Strategic Crypto Reserve
6)
The Department of Government Efficiency (aka DOGE) has said it wants to use blockchain (crypto's underlying technology) to try and improve efficiency and automate some processes
In my view, this administration should stop squandering political capital on stunts like a crypto reserve and instead work with industry, civil society, regulators and lawmakers to craft the laws and regulations that can put the industry on a firm footing, encourage investment from institutions and enterprises and catalyze more capital formation and entrepreneurship.
|
|
THIS WEEK ON DEFI DECODED
|
|
|
|
|
|
Join Alex Tapscott and Andrew Young as they decode the world of Web3 and DeFi with special guest Jelena Djuric, CEO and Co-Founder of Noble. Listen in as they discuss key takeaways from ETHDenver 2025, the fastest-growing sectors in crypto, Noble’s achievements over the past year, the launch of Noble Dollar (USDN) and how it differs from traditional stablecoins, the concept of composable yield and its significance, the potential for a synthetic digital dollar backed by a basket of currencies, the future of DeFi, and more.
|
|
|
|
By: Jake Moodie
, Analyst, Digital Asset Group at Ninepoint Partners
President Trump Set to Host Inaugural White House Crypto Summit This Friday Amid Strategic Crypto Reserve Controversy
President Trump is
hosting the first-ever White House Crypto Summit this Friday, bringing together industry founders, CEOs, investors, and the working group on digital assets. The event will be chaired by White House AI and Crypto Czar David Sacks and led by Executive Director Bo Hines. This comes after Trump’s
announcement on Sunday of a U.S. Crypto Strategic Reserve, which plans to hold Bitcoin, Ethereum, XRP, Solana, and Cardano. The market initially surged on the news, but prices quickly returned to pre-announcement levels as investors questioned its feasibility. At the Bitcoin Conference 2024 in Nashville last summer, Trump
pledged to establish a Strategic Bitcoin Reserve (SBR). Then in January, he ordered the working group to explore creating a national digital asset stockpile, raising concerns due to the broader scope and shift in terminology. Trump’s latest move has drawn major criticism, with industry leaders like Coinbase CEO Brian Armstrong and Bitwise CEO Hunter Horsley arguing the reserve should hold only Bitcoin.
According to Commerce Secretary Howard Lutnick, more on the U.S. Crypto Strategic Reserve will be announced at this summit.
Ethereum Foundation Signals New Era Ahead with Leadership Overhaul and $120 Million DeFi Ecosystem Injection
In January, we hosted Gnosis Co-Founder Dr. Friederike Ernst on our
DeFi Decoded podcast to discuss Ethereum’s crossroads. This was largely driven by its significant underperformance relative to Bitcoin and Solana, sparking fears across the crypto community that Ethereum was in decline. Sentiment appeared to hit historic lows, and many long-time ecosystem contributors began calling for change—particularly within the Ethereum Foundation—to revitalize growth and keep Ethereum competitive in an increasingly crowded Layer 1 landscape. We’re happy to report that change is now underway. Last week, the Ethereum Foundation
announced that Hsiao-Wei Wang, a core researcher, and Tomasz Stańczak, CEO of Nethermind, will become co-Executive Directors on March 17. In the announcement, the Foundation emphasized the need for Ethereum to “navigate the challenging transition from being an early-stage project to being a base layer of the global finance and software stack” in the coming years. Additionally, Danny Ryan, a key figure in past Ethereum upgrades like the Merge,
has rejoined the Ethereum ecosystem after departing in September. He will serve as a Co-Founder at Etherealize, helping to accelerate institutional adoption of the network. This follows the Ethereum Foundation’s February
move to inject 45,000 ETH ($120 million) into DeFi applications across the network to better engage with and support the ecosystem.
BlackRock Makes First-Ever Bitcoin Allocation in $150B Model Portfolio Suite with 1-2% Weighting
BlackRock, the world’s largest asset manager with nearly $12 trillion in AUM,
has added 1-2% Bitcoin exposure to its $150 billion model portfolio suite through its iShares Bitcoin ETF (IBIT). This move aligns with BlackRock’s December 2024 report,
Sizing Bitcoin in Portfolios, which suggested this exact allocation. It marks the first time BlackRock has included Bitcoin in its model portfolios. Lead Portfolio Manager Michael Gates stated,
“Bitcoin has long-term investment merit and can potentially provide unique and additive sources of diversification to portfolios.” Since launching in January 2024, IBIT has
seen $40 billion in net inflows, bringing its total AUM to $50 billion—making it the world’s largest Bitcoin and crypto ETF. Other TradFi asset managers have also explored Bitcoin allocations in portfolios. VanEck’s
Optimal Crypto Allocation for Portfolios published last November found a 6% crypto weighting—70% Bitcoin, 30% Ethereum—was ideal in a traditional 60/40 portfolio. Additionally, Fidelity’s Head of Digital Asset Strategies, Matt Horne, has
recommended a 1-5% Bitcoin allocation for interested investors.
|
|
|
|
|
|
|
Chart #1: BTC and ETH ETFs' Flows Tell
A Story of Two Halves: Pre and Post Trump Election Win
|
Net flows of the Bitcoin and Ethereum ETFs tell a story of two halves: before and after Trump’s election win. Before the election, Bitcoin ETFs
had traded for 215 days and Ethereum ETFs for 77, collectively experiencing $23.6 billion in net inflows. However, in the 30 days following Trump’s victory, inflows surged by $15.8 billion—hitting a record $1.5 billion on the day after his win—helping push Bitcoin to a new all-time high of nearly $110,000. Since then, the trend has reversed for the worse, with record-setting outflows. Last week, these ETFs experienced their worst outflow day ever, with $1.2 billion withdrawn. Retail buying behaviour has also shifted. Last summer, fears of intense Bitcoin selling pressure from the German government and Mt. Gox creditors caused a sizable correction, but retail investors stepped in, driving strong ETF inflows. This time, despite a similar percentage-sized correction, we are seeing large outflows instead. To be sure, broader market conditions are much different this time around. The trade war, tariff threats, and the bursting of the memecoin bubble have catalyzed a major risk-off environment. However, drawdowns like the one we are currently experiencing have historically proved to be typical features of bull market cycles, with peak fear sentiment (as we
discussed last week) usually indicating a local bottom.
|
|
|
|
|
|
Chart #2:
The Growing Divergence Between Bitcoin and Altcoins: What’s Driving It?
|
Over the past few months, a growing divergence has emerged between Bitcoin’s market cap and that of the rest of the crypto market. Historically, these two have moved in tandem, with altcoins sometimes outpacing Bitcoin during strong altcoin seasons. Currently, Bitcoin
has a market cap of $1.7 trillion, while altcoins account for $1.2 trillion. Two main factors explain this gap: Bitcoin ETF inflows and corporate purchases, and the underperformance of altcoins. First,
83% of the $139 billion in global crypto investment products is in Bitcoin, despite it only holding 60% of the market dominance. Public and private companies
have increased their Bitcoin holdings by 45%, from 760,000 BTC at the start of 2024 to 1.1 million today. The Saylor-led MicroStrategy has spearheaded this movement, now owning 499,000 BTC, or 2.4% of the total supply. On the flip side, altcoins, especially large-cap ones like Ethereum, have struggled relative to Bitcoin. Despite Ethereum's $260 billion market cap, it’s still down 55% from its 2021 peak, and many of the largest altcoins are in similar situations. This could suggest we’re still early in this cycle, with a potential altcoin season ahead. However, the typical Bitcoin-to-altcoin rotation that once ignited these cycles may be over, given the massive capital siloed away from the rest of the market in ETFs and corporate holdings.
|
|
|
March 6, 2025
