- Analysts at Bernstein have questioned the rationale behind including altcoins in a U.S. strategic crypto reserve
- President Trump’s announcement of a U.S. strategic crypto reserve has included altcoins such as Ethereum, XRP, Solana, and Cardano alongside Bitcoin
- The proposal faces challenges regarding funding mechanisms and legal authority, according to Bernstein’s analysis
The purpose of including alt coins in the U.S.’s first strategic crypto reserve is “unclear,” according to research group Bernstein. President Donald Trump declared the strategic reserve yesterday, and it was the presence of XRP, SOL, ETH, and ADA that sparked debate among financial analysts. While Bitcoin’s inclusion aligns with its “digital gold” status, analysts at Bernstein have expressed skepticism regarding this strategy, highlighting uncertainties in both rationale and implementation.
Experts Left Scratching Their Heads
In a note to clients, Bernstein analysts, including Gautam Chhugani, Mahika Sapra, and Sanskar Chindalia, expressed reservations about the inclusion of altcoins in the proposed reserve:
ETH and SOL are the two most-used blockchain networks, and holding their native assets supports the growth of the industry—but the rationale for a sovereign to hold it in reserve is unclear.
The analysts emphasized that while Bitcoin’s role as a global store of value could justify its inclusion, extending this rationale to other blockchain assets presents challenges:
We think a realistic path could be that the U.S. government can convince the Congress that Bitcoin is the new digital gold/global store of value and a gold revaluation/gold reserve reallocation makes sense. However, buying other blockchain assets from Fed funds or treasury funds is a difficult sell.
Funding and Legal Hurdles
Beyond the selection of assets, Bernstein’s report highlighted significant concerns regarding funding mechanisms and legal authority for establishing the crypto reserve. The analysts pointed out that potential funding options, such as reallocating gold reserves or issuing Treasury debt, could face substantial obstacles:
It is not clear if the strategic reserve can be created merely by President’s executive order. If the Fed balance sheet is involved, it would require a specific bill to be passed by the Congress.
The announcement led to immediate market reactions, with Bitcoin surging over 7% and altcoins like Cardano experiencing gains up to 46%, although all these gains were reversed within 24 hours in a sign that the crypto market is not in a good place right now.
Bitcoin maximalists have also voiced concerns about the government’s involvement in altcoins, arguing that taxpayer funds should not support assets perceived as less decentralized. Venture capitalist Naval Ravikant commented, “The US taxpayer should not be exit liquidity for cryptocurrencies that are decentralized in name only.”
Additionally, the political feasibility of diverting taxpayer revenue into altcoins, especially amid public spending cuts, remains contentious. Critics argue that such a move could face significant opposition in Congress, particularly regarding the allocation of federal funds to volatile digital assets.
