March 14, 2025 • 9 mins
Donald Trump's election sparked a frenzy of optimism in the crypto world, but his much-heralded announcement of a strategic Bitcoin reserve left investors disappointed. The biggest digital token slumped further from its record highs. Bloomberg's Executive Editor for Crypto, stacy-marie ishmael joins host Stephen Carroll to explain why.
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Episode Transcript
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Speaker 1 (00:02):
Bloomberg Audio Studios, podcasts, radio News. I'm Stephen Carroll, and
this is Here's Why, where we take one new story
and explain it in just a few minutes with our
experts here at Bloomberg.
Speaker 2 (00:20):
I promise to make America the bitcoin superpower of the
world and the crypto capital of the planet, and we're
taking historic action to deliver on that promise.
Speaker 1 (00:31):
Donald Trump's election sent a shock wave of excitement through
the crypto world, propelling bitcoin to record highs of over
one hundred thousand dollars.
Speaker 2 (00:41):
There was a lot of uncertainty on whether we would
have a crypto friendly administration here in the US. The
answer is a resounding yes, and so I think we're
seeing all this pent up demand.
Speaker 1 (00:52):
The US President has become a strong advocate for digital assets.
He even has his own mean coin, so investors were
bracing for a big moment when he gathered industry executives
for a digital Asset summit at the White House and
appointed David Sachs as its cryptos are.
Speaker 3 (01:08):
We've decided that bitcoin is scarce, it's valuable, and that
is strategic for the United States to hold on to
this as a long term reserve. Asset.
Speaker 1 (01:17):
Donald Trump also signed an executive order creating a US
Bitcoin reserve and a separate stockpile of other tokens, but
investors didn't seem impressed. The price of bitcoin and other
crypto assets slumped after the announcement. Here's why crypto fans
are underwhelmed by Trump's plans. Let's bring in our executive
(01:38):
editor for crypt Stacy Mrishmel, for more. Stacey Ury, great
to have you with us. What exactly are the reserves
that Donald Trump now wants to create?
Speaker 3 (01:47):
That is the one hundred thousand dollars question, so to start,
I think it's important for folks to understand that this
was a big campaign pledge from now President Donald Trum
when he was still you know, pre election. He stood
at a huge gathering of bitcoin fans in Nashville in
(02:08):
the United States last July and said, we want to
make the US the crypto capital of the planet. We're
going to do it with bitcoin. We're going to have
this idea of a bitcoin Fort Knox. And at the time,
what people thought that meant was the US government is
going to become a buyer of bitcoin. Right, like, to
use the industry parlance, the US government was going to
become a bitcoin whale and hold a whole bunch of
(02:30):
these tokens, buy a whole bunch of these tokens. Fast
forward to March and this executive order that you just mentioned,
and the reality is a little bit more muted, shall
we say, because this idea of the reserve is formalizing
the idea that for any bitcoin the US government currently owns,
they're not going to sell it. But there isn't this
(02:53):
enormous mandate to go out and buy a huge amount.
Speaker 1 (02:55):
More So, why does the Trump administration want to be
invested in crypto at all or even if they're not
going to bias?
Speaker 3 (03:03):
There are a few ways we've attempted to answer this
question right. The first is, and it's very much related
to this idea of why was the presidents at a
bitcoin conference in last July anyway? And the answer is,
over the past few years, the crypto industry, and in particular,
some very wealthy individuals in the crypto industry, became mega
donors to political campaigns, presidential campaigns, congressional campaigns up and
(03:28):
down the ballot. Democrats, Republicans, and you know, politicians realized
that this was a new constituency to be courting for
their considerable financial reserves, and so this idea of appealing
to that audience by making promises about crypto, by making
promises about bitcoin, was definitely something that happened. Fans of
(03:51):
bitcoin will often say something to the effect of they're
only ever going to be a certain number of tokens.
That introduces this idea of scarcity, and so if the
US government buys some of those tokens, it's going to
help the price go up even further. And so everybody
who's currently holding bitcoin is really going to benefit, including
the US government. Now there's a little bit of circularity
(04:13):
to that argument if everybody buys it and nobody sells
and the price will go up, you know, which is
kind of like, okay, well, if you have a reserve,
sometimes you might want to use that to do other things,
not just hold it infinitely into the future. But that's
also one of the reasons this idea of having a
big strategic investor, shall we say, like the US government
giving a vote of confidence to this often very volatile
(04:33):
digital asset, will introduce a floor for the price of
this thing.
Speaker 1 (04:38):
So, okay, the reason that we explain the price reaction
is because the US government isn't investing in it. I've
got that part. What other things, though, has President Trump said,
like for example, on regulation that are being more broadly
perceived as positive for crypto.
Speaker 3 (04:52):
As you mentioned this idea of the bitcoin Fort Knox,
the strategic reserve was only one of the promises made
to the crypto industry. Another really big one was to
undo what was perceived by the industry as this hostile
regulatory climate. You know. So under the previous chair of
the Securities and Exchange Commission, really important US regulator, a
(05:15):
lot of crypto companies had been sued investigated. You know. Famously,
there was the FTX crypto exchange fraud that saw sam
bankmin Freed go to jail for relatively long amount of time.
But there were also allegations against finance at still the
world's largest crypto exchange, who were you know, sued for
(05:35):
four point three billion dollars on kind of very significant allegations,
including failure to prevent money laundering and other such crimes.
So there was a perception from the industry that what
they described as a few bad actors had unreasonably tainted
everybody else, and that the SEC was overly aggressive in
attempting to police them. Trump at this same conference in
(05:59):
Nashville said one I'm gonna fire Gary Againstler. He didn't
have to fire Gary Againstler. Chair Againstler resigned And you know,
on the same day that Trump was inaugurated, that took effect.
But since then, you know, under Trump, regulators have taken
a really different approach. The same SEC which was doing
all of these investigations has dropped or paused most of
(06:20):
the open investigations in cases, other regulators have come out
and said, we're going to be effectively much more chill
on this than we were previously.
Speaker 1 (06:28):
What are the features that's helped to boost the prize
a bitcoin in recent years has been more professional investors
getting involved in this space. What's their view of these changes?
And what about the economists perspective and all of this.
Do they think that a strategic reserves a good idea?
Speaker 3 (06:43):
I'll start with the economists, because it's very much linked
to the atmosphere that we're in right now. If anyone
has ever thought of a strategic reserve, I don't know
what kind of dinner party conversation everybody else has, but
my friends and I talk about this all the time.
So when you know, when you talk about a strategic reserve,
you're often thinking about oh, okay, foreign exchange or gold
or oil, things that are traditionally perceived as having some
(07:06):
sort of value or utility that can be exchanged, used
sold as might be you know, necessary to either support
the ongoing operations of a country or for other financial reasons.
And so the you know, the kind of the critics
of this idea of a reserve are like, well, what
are you going to do with the bitcoin?
Speaker 2 (07:24):
Though?
Speaker 3 (07:25):
Right? Like, is what is the problem that you are
trying to solve here? And there has been a certain
amount of skepticism that this makes sense.
Speaker 2 (07:35):
You know.
Speaker 3 (07:36):
We had an opinion piece from Bill Dudley, former presidents
of the Federal Reserve Bank of New York and now
Bloomberg columnist, who said, without mincing words, it's hard to
fathom how this would benefit most Americans. And that's the
idea of other than inherent speculative value, or this idea
of you know, if you buy and hold, the price
(07:56):
might appreciate. There isn't necessarily a wide bread utility for
bitcoin as a means of payments. For instance, enter those
institutional investors that you mentioned. A big thing that has
rallied or contributed to the rally in bitcoin over the
past year or so has been the introduction of exchange
traded funds that are backed by bitcoin. And so you
(08:20):
can now go to a financial advisor here in the
US and say, I want to get some crypto exposure
in my portfolio. What is one of the ways that
I can do that. You can buy an ETF, and
ETFs are some of them, like the most popular kind
of retail products that are available to different kinds of investors.
And the problem, though, is when you institutionalize an asset class,
(08:41):
when you have it being bought at very large size
by other people who take macroeconomic considerations into account, when
the economy is perceived is not doing too well, or
when people's risk profile changes, anything that they have in
those portfolios that they consider it to be risky gets
sold off with everything else. You have a correlation problem.
That's really been something we've been seeing with crypto. You know,
(09:03):
there's concern about tariffs, stocks are falling, Bitcoin is falling,
there's concern about slowing rates of growth. Stocks are falling,
Bitcoin is falling.
Speaker 1 (09:12):
Stacy Murriy shmel Our, executive editor for Crypto. Thank you.
For more explanations like this from our team of three
thousand journalists and analysts around the world, go to Bloomberg
dot com slash explainers. I'm Stephen Carol. This is here's why.
I'll be back next week with more. Thanks for listening.
Bloomberg Audio Studios, podcasts, radio News. I'm Stephen Carroll, and
this is Here's Why, where we take one new story
and explain it in just a few minutes with our
experts here at Bloomberg.
Speaker 2 (00:20):
I promise to make America the bitcoin superpower of the
world and the crypto capital of the planet, and we're
taking historic action to deliver on that promise.
Speaker 1 (00:31):
Donald Trump's election sent a shock wave of excitement through
the crypto world, propelling bitcoin to record highs of over
one hundred thousand dollars.
Speaker 2 (00:41):
There was a lot of uncertainty on whether we would
have a crypto friendly administration here in the US. The
answer is a resounding yes, and so I think we're
seeing all this pent up demand.
Speaker 1 (00:52):
The US President has become a strong advocate for digital assets.
He even has his own mean coin, so investors were
bracing for a big moment when he gathered industry executives
for a digital Asset summit at the White House and
appointed David Sachs as its cryptos are.
Speaker 3 (01:08):
We've decided that bitcoin is scarce, it's valuable, and that
is strategic for the United States to hold on to
this as a long term reserve. Asset.
Speaker 1 (01:17):
Donald Trump also signed an executive order creating a US
Bitcoin reserve and a separate stockpile of other tokens, but
investors didn't seem impressed. The price of bitcoin and other
crypto assets slumped after the announcement. Here's why crypto fans
are underwhelmed by Trump's plans. Let's bring in our executive
(01:38):
editor for crypt Stacy Mrishmel, for more. Stacey Ury, great
to have you with us. What exactly are the reserves
that Donald Trump now wants to create?
Speaker 3 (01:47):
That is the one hundred thousand dollars question, so to start,
I think it's important for folks to understand that this
was a big campaign pledge from now President Donald Trum
when he was still you know, pre election. He stood
at a huge gathering of bitcoin fans in Nashville in
(02:08):
the United States last July and said, we want to
make the US the crypto capital of the planet. We're
going to do it with bitcoin. We're going to have
this idea of a bitcoin Fort Knox. And at the time,
what people thought that meant was the US government is
going to become a buyer of bitcoin. Right, like, to
use the industry parlance, the US government was going to
become a bitcoin whale and hold a whole bunch of
(02:30):
these tokens, buy a whole bunch of these tokens. Fast
forward to March and this executive order that you just mentioned,
and the reality is a little bit more muted, shall
we say, because this idea of the reserve is formalizing
the idea that for any bitcoin the US government currently owns,
they're not going to sell it. But there isn't this
(02:53):
enormous mandate to go out and buy a huge amount.
Speaker 1 (02:55):
More So, why does the Trump administration want to be
invested in crypto at all or even if they're not
going to bias?
Speaker 3 (03:03):
There are a few ways we've attempted to answer this
question right. The first is, and it's very much related
to this idea of why was the presidents at a
bitcoin conference in last July anyway? And the answer is,
over the past few years, the crypto industry, and in particular,
some very wealthy individuals in the crypto industry, became mega
donors to political campaigns, presidential campaigns, congressional campaigns up and
(03:28):
down the ballot. Democrats, Republicans, and you know, politicians realized
that this was a new constituency to be courting for
their considerable financial reserves, and so this idea of appealing
to that audience by making promises about crypto, by making
promises about bitcoin, was definitely something that happened. Fans of
(03:51):
bitcoin will often say something to the effect of they're
only ever going to be a certain number of tokens.
That introduces this idea of scarcity, and so if the
US government buys some of those tokens, it's going to
help the price go up even further. And so everybody
who's currently holding bitcoin is really going to benefit, including
the US government. Now there's a little bit of circularity
(04:13):
to that argument if everybody buys it and nobody sells
and the price will go up, you know, which is
kind of like, okay, well, if you have a reserve,
sometimes you might want to use that to do other things,
not just hold it infinitely into the future. But that's
also one of the reasons this idea of having a
big strategic investor, shall we say, like the US government
giving a vote of confidence to this often very volatile
(04:33):
digital asset, will introduce a floor for the price of
this thing.
Speaker 1 (04:38):
So, okay, the reason that we explain the price reaction
is because the US government isn't investing in it. I've
got that part. What other things, though, has President Trump said,
like for example, on regulation that are being more broadly
perceived as positive for crypto.
Speaker 3 (04:52):
As you mentioned this idea of the bitcoin Fort Knox,
the strategic reserve was only one of the promises made
to the crypto industry. Another really big one was to
undo what was perceived by the industry as this hostile
regulatory climate. You know. So under the previous chair of
the Securities and Exchange Commission, really important US regulator, a
(05:15):
lot of crypto companies had been sued investigated. You know. Famously,
there was the FTX crypto exchange fraud that saw sam
bankmin Freed go to jail for relatively long amount of time.
But there were also allegations against finance at still the
world's largest crypto exchange, who were you know, sued for
(05:35):
four point three billion dollars on kind of very significant allegations,
including failure to prevent money laundering and other such crimes.
So there was a perception from the industry that what
they described as a few bad actors had unreasonably tainted
everybody else, and that the SEC was overly aggressive in
attempting to police them. Trump at this same conference in
(05:59):
Nashville said one I'm gonna fire Gary Againstler. He didn't
have to fire Gary Againstler. Chair Againstler resigned And you know,
on the same day that Trump was inaugurated, that took effect.
But since then, you know, under Trump, regulators have taken
a really different approach. The same SEC which was doing
all of these investigations has dropped or paused most of
(06:20):
the open investigations in cases, other regulators have come out
and said, we're going to be effectively much more chill
on this than we were previously.
Speaker 1 (06:28):
What are the features that's helped to boost the prize
a bitcoin in recent years has been more professional investors
getting involved in this space. What's their view of these changes?
And what about the economists perspective and all of this.
Do they think that a strategic reserves a good idea?
Speaker 3 (06:43):
I'll start with the economists, because it's very much linked
to the atmosphere that we're in right now. If anyone
has ever thought of a strategic reserve, I don't know
what kind of dinner party conversation everybody else has, but
my friends and I talk about this all the time.
So when you know, when you talk about a strategic reserve,
you're often thinking about oh, okay, foreign exchange or gold
or oil, things that are traditionally perceived as having some
(07:06):
sort of value or utility that can be exchanged, used
sold as might be you know, necessary to either support
the ongoing operations of a country or for other financial reasons.
And so the you know, the kind of the critics
of this idea of a reserve are like, well, what
are you going to do with the bitcoin?
Speaker 2 (07:24):
Though?
Speaker 3 (07:25):
Right? Like, is what is the problem that you are
trying to solve here? And there has been a certain
amount of skepticism that this makes sense.
Speaker 2 (07:35):
You know.
Speaker 3 (07:36):
We had an opinion piece from Bill Dudley, former presidents
of the Federal Reserve Bank of New York and now
Bloomberg columnist, who said, without mincing words, it's hard to
fathom how this would benefit most Americans. And that's the
idea of other than inherent speculative value, or this idea
of you know, if you buy and hold, the price
(07:56):
might appreciate. There isn't necessarily a wide bread utility for
bitcoin as a means of payments. For instance, enter those
institutional investors that you mentioned. A big thing that has
rallied or contributed to the rally in bitcoin over the
past year or so has been the introduction of exchange
traded funds that are backed by bitcoin. And so you
(08:20):
can now go to a financial advisor here in the
US and say, I want to get some crypto exposure
in my portfolio. What is one of the ways that
I can do that. You can buy an ETF, and
ETFs are some of them, like the most popular kind
of retail products that are available to different kinds of investors.
And the problem, though, is when you institutionalize an asset class,
(08:41):
when you have it being bought at very large size
by other people who take macroeconomic considerations into account, when
the economy is perceived is not doing too well, or
when people's risk profile changes, anything that they have in
those portfolios that they consider it to be risky gets
sold off with everything else. You have a correlation problem.
That's really been something we've been seeing with crypto. You know,
(09:03):
there's concern about tariffs, stocks are falling, Bitcoin is falling,
there's concern about slowing rates of growth. Stocks are falling,
Bitcoin is falling.
Speaker 1 (09:12):
Stacy Murriy shmel Our, executive editor for Crypto. Thank you.
For more explanations like this from our team of three
thousand journalists and analysts around the world, go to Bloomberg
dot com slash explainers. I'm Stephen Carol. This is here's why.
I'll be back next week with more. Thanks for listening.
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