Author: YBB Capital Researcher Zeke
On March 6, U.S. President Donald Trump signed an executive order to officially establish the U.S. Strategic Bitcoin Reserve. David Sachs, the White House cryptocurrency affairs supervisor, further clarified the reserve details on social media platform X: about 200,000 Bitcoins held by the federal government will be included in this strategic reserve. These assets were all seized through criminal or civil forfeiture procedures, and it was clearly stated that “they will neither be sold nor purchased through the market.”
In a previous article I published on March 4, I speculated about some of the developments regarding the strategic reserve. Interestingly, the current situation closely aligns with the predictions I made at that time. Trump did not, as previously promised, include altcoins like SOL or XRP in the reserve list, nor did he inject new fiscal funds into the BTC reserve. Instead, he simply allocated all the seized Bitcoins into the strategic reserve. One surprising aspect, however, is how quickly the reserve was implemented — Trump didn’t delay using this “trump card” for long. With the release of this move, the market’s fantasy about government bulk purchases has faded, and BTC has fallen back to a low point of around $77,000. Now, no matter how you look at it, Trump’s remaining strategic options seem few. But it’s worth pondering: Is this truly the limit for this “crypto president” who has dominated both business and politics for decades?
The collapse of the Bretton Woods system, the cracks in the petrodollar, and the rise of Bitcoin all represent the U.S. dollar’s evolving anchors over time.
The establishment of the Bretton Woods system in 1944 marked the dollar becoming the “ultimate anchor” of the global monetary system by being pegged to gold ($35 per ounce). The core logic of this system was that the physical scarcity of gold backed the dollar’s credit, while the dollar’s network effect magnified gold’s liquidity. However, the Triffin Dilemma exposed the fatal flaw of this system — global trade expansion required the outflow of dollars (U.S. deficits), while maintaining dollar credit depended on U.S. surpluses and ample gold reserves. In 1971, Nixon announced the decoupling of the dollar from gold, breaking free of the gold constraints to maintain its hegemony. It proved that any monetary system rigidly tied to physical resources would eventually collapse due to the irreconcilable conflict between resource scarcity and economic expansion. The end of the gold standard forced the U.S. to seek a more flexible anchor.
The first oil crisis of 1973 provided Nixon with the answer: oil, with its unquestionable importance to modern industry. In the following year, U.S. Treasury Secretary William Simon and his deputy, Gerry Parsky, were sent to Saudi Arabia, where they signed the “Irrevocable Agreement.” The U.S. promised military protection and security guarantees to Saudi Arabia, in exchange for Saudi Arabia agreeing to price all oil exports in dollars and using the excess oil revenue to buy U.S. Treasury bonds. Thus began the 2.0 era — oil replaced gold as the new anchor for the dollar’s credit. The petrodollar system operated through a closed loop of “oil trade — dollar repatriation — U.S. debt purchases.” Wall Street packaged these oil dollar debts into derivatives (with a scale of $610 trillion in 2023), diluting credit risk via “debt monetization.”
The essence of this circular logic is that the U.S. levied a “seigniorage tax” on the world through oil trade. But now, with the U.S. fiscal deficit at a high (7% of GDP) and national debt surpassing $36 trillion this year, this system has become a Ponzi scheme of borrowing to pay off old debts. As de-dollarization of oil trade gradually expands, this loop is set to unravel. So what comes next? Who will fill the void left by oil?
Trump currently holds two powerful cards — Nvidia and Bitcoin. In the narrative of AI, Nvidia plays the role of the “digital Middle East” where everyone needs computational power, but only I produce it. Unfortunately, a certain Eastern nation has already taken a “small but beautiful” approach to AI computing power, so before the complete arrival of the AI Agent era, computing power and digital oil are not yet synonymous (or certain countries may be self-sufficient in oil).
Let’s look at the second card: Bitcoin. The idea of Bitcoin as a strategic reserve originated from Senator Lummis’ proposal last year to Congress, arguing that the purchasing power of the dollar has been declining, while Bitcoin’s annual growth rate has been 55%, making it an excellent hedge against inflation and a new type of store of value to replace gold. Trump even said, “Give them a little cryptocurrency check. Give them some Bitcoin, then wipe out our $35 trillion.” Whether pegging the dollar to Bitcoin or using it to pay off U.S. debt, I have consistently opposed these ideas. The first reason is mentioned above — the collapse of the Bretton Woods system. Bitcoin, with its hard cap of 21 million coins, is far scarcer than gold, and the U.S. cannot repeat the Triffin Dilemma. Second, the volatility is too high, and with only 200,000 Bitcoins currently in reserve, it is worth less than $20 billion. This amounts to only 0.056% of the U.S. debt. To make an effective peg, the U.S. would need to hold at least 30% of Bitcoin’s circulating supply (around 6 million coins), or drastically increase Bitcoin’s value and stabilize its price — neither of which seems realistic. Third, pegging the dollar to Bitcoin would only accelerate the dollar’s marginalization. How to convert Bitcoin into a global tax base is another unresolved question.
From the current situation of the strategic reserve’s implementation, it’s clear that the Trump administration in the short term cannot find a better entry point. But the speed with which this card was played makes me reconsider: Do they have a bigger trump card up their sleeve?
My personal thoughts, extending from the previous article’s speculations:
Bitcoin’s scarcity does not imply that all cryptocurrencies are scarce. Most public chain tokens are designed with deflationary mechanisms. The U.S. dollar is currently backed by oil, with gold as its face. The structure of the digital Fort Knox could be hybrid: BTC as gold, and public chain tokens like ETH or SOL as oil. As the large-scale adoption of “Crypto City” progresses, could it form a U.S.-styled closed-loop in crypto? For instance, various stablecoin projects like Usual and Tether continue to facilitate so-called USD settlement, and their structural mechanisms or sources of profit are closely tied to U.S. debt. Does this bear some resemblance to the petrodollar system?
At this stage, refraining from buying or selling is reasonable, but if the ultimate move is limited to this, the announcement of this news would have been premature. Trump is no fool, and neither is his crypto team. There’s a growing rumor within the industry that a U.S. sovereign wealth fund (currently still in the planning stage) will be purchasing cryptocurrency. I tend to agree that this sovereign wealth fund is likely his trump card.
Initially, I thought Trump was only issuing empty promises to the crypto industry for the benefit of his underlying network. However, considering the current situation, we may need to think bigger. It’s just a matter of time before mainstream countries follow suit with strategic reserves. Personally, I believe BTC is the easiest to accept, but SOL and even XRP could surpass ETH in terms of standing (as adoption advances).
The largest unit in the crypto battle is no longer the public chain. Trump seems to be consolidating the biggest CEXs, public chains, and various giant projects, but how he will consolidate them remains unclear. How will those resisting be able to fight back?
Wall Street is abuzz with rumors that Trump is orchestrating a self-inflicted recession to pressure the Federal Reserve into lowering interest rates. Every time the market seems poised to improve, Trump and Musk (the Efficiency Department) strike a heavy blow. So, is Trump also trying to suppress the crypto market? Turning top expectations into bubbles? However, I don’t quite agree with this point. First, the AI bubble in the U.S. stock market undeniably exists — although it can’t be compared to the dot-com bubble of 2000, overheating is certain. Secondly, the heavy-handed approach from Trump and Musk will inevitably provoke backlash, with the left’s counterattack being inevitable. The so-called “recession” is actually a joint effort.
Regarding points 1, 3, and 5, I can only speculate at this stage, but for points 2 and 4, I believe I can expand further.
On February 3 of this year, Trump signed an executive order instructing the creation of a U.S. sovereign wealth fund within the next year. The order requires the Department of Commerce and the Department of Treasury to submit a plan within 90 days, including the funding mechanism, investment strategy, financial structure, and governance model. The fund aims to finance infrastructure, supply chains, and strategic industries.
Approximately 50 countries and regions globally have sovereign wealth funds, with China’s CIC and Hua’an ranking second and third in the world. The investment styles of sovereign funds vary according to the country’s situation. For example, the Middle East focuses on strategic industries, Norway focuses on stock investments, and China serves private equity, real estate, and the Belt and Road Initiative. The benefits of establishing a sovereign wealth fund are fourfold: 1. Smoothing out economic fluctuations (hedging resource price risks, optimizing foreign exchange reserves management); 2. Driving economic structural transformation (such as the Middle East’s support for tourism and technology); 3. Gaining global financial influence; 4. Protecting society and building social welfare.
The establishment of the U.S. sovereign wealth fund is primarily driven by the TikTok dispute. Publicly, it’s seen as Trump buying the American people’s favorite internet company while also addressing fiscal deficits and infrastructure upgrades. Privately, this is Trump’s power upgrade, using his business acumen in the White House. If circumstances allow, this fund could become the primary source of funds for the crypto strategic reserve. This is not entirely speculative. The fund’s key leader, nominee for Secretary of Commerce, Lutnik, was the CEO of Cantor Fitzgerald, one of Tether’s custodians, and has managed related assets. Additionally, Lutnik is a Bitcoin supporter, so having him in charge of the sovereign wealth fund planning is not surprising — it seems to pave the way for Trump’s crypto family and the interests behind him. Moreover, most sovereign funds are registered in offshore financial centers such as the Cayman Islands or Luxembourg, taking advantage of local laws to avoid disclosure requirements, thus allowing for behind-the-scenes operations. For example, Saudi Arabia’s Public Investment Fund (PIF) holds 320,000 Bitcoins through offshore shell companies, entirely outside of sovereign asset balance sheet regulation. Trump’s previous regrets during his 2016 term may now be fully addressed in this term.
Regarding funding sources, there are only four options: earn, sell, borrow, or print. Based on the current situation in the U.S., the most likely options are the first two. Trump hopes to fill the fund with tariff revenues, or alternatively, by selling the $5.7 trillion worth of assets currently held by the federal government. Of course, which method is used to establish the fund is not as important as the potential scale of the ideal fund. If this becomes a reality, the core points are: 1. Government buying will become a fact; 2. U.S.-centric crypto projects will be the primary — and possibly only — Alpha in the crypto world; 3. Whether top projects accept investment from sovereign funds will determine their survival.
This month, Binance made two major moves. First, it partnered with the UAE royal family to receive a $2 billion investment from the sovereign wealth fund MGX. Rumors have suggested that discussions were also held between Binance and U.S. officials regarding an investment. The Wall Street Journal even claimed that CZ may have traded equity for a pardon for the Trump family. Second, Binance Smart Chain (BSC) seamlessly integrated into its own CEX, meaning that CEX users can now easily participate in on-chain transactions on BSC using stablecoins. These moves highlight the systematic integration of traditional finance and geopolitical forces into the crypto space. Moreover, embracing centralization seems to be the only way forward for public chains. Crypto is being divided by various countries, and public chains either have to embrace the elites or get embedded in CEXes, where their growth and strength depend on the distribution of traffic.
Ethereum, which has chosen to remain independent, continues to maintain its proud stance, even as its exchange rate with BTC continues to hit new lows. The crypto community’s doubts about the Ethereum Foundation and Vitalik have persisted for almost a year. However, from my perspective, Ethereum’s survival — and its potential counterattack — is critical for the crypto world. Today, there are only two paths: submission or resistance.
Those who submit will share the rewards with the elites and enjoy temporary peace. But what happens when tomorrow sees ten cities being cut off after five today? The Web3 that continually pumps centralization will no longer be Web3. Eventually, seven countries will be unified under Qin. Ethereum may have a peculiar dictator, but it remains the only public chain deserving of the term decentralized ecosystem. Yes, even today. I am not a staunch supporter of Ethereum, but I do not wish to see it become the Handan City of crypto. Value should ideally reside in the code that runs on the blockchain, not in a line of signatures on a White House executive order.
YBB is a web3 fund dedicating itself to identify Web3-defining projects with a vision to create a better online habitat for all internet residents. Founded by a group of blockchain believers who have been actively participated in this industry since 2013, YBB is always willing to help early-stage projects to evolve from 0 to 1.We value innovation, self-driven passion, and user-oriented products while recognizing the potential of cryptos and blockchain applications.