The possibility of the United States establishing a strategic cryptocurrency reserve is considered less than 50%, according to a recent analysis by JPMorgan. The report highlights that even if such a proposal were to be approved, including tokens like XRP, Solana, and Cardano would present challenges due to concerns about their volatility and regulatory uncertainties.
Nikolaos Panigirtzoglou, JPMorgan’s Global Markets Strategy Director, pointed out that creating an official crypto reserve would require congressional approval. This reliance on lawmakers, who have generally displayed considerable skepticism toward incorporating cryptoassets into sovereign reserves, significantly diminishes the likelihood of the idea’s realization.
Reasons for Excluding Certain Digital Assets
JPMorgan’s analysis indicates that a successful crypto reserve would likely concentrate on assets with substantial market capitalization and strong institutional support—primarily Bitcoin and Ethereum. Incorporating smaller tokens like XRP, Solana, and Cardano would not only introduce greater volatility but also increase regulatory risks, making it difficult to integrate these tokens into official economic policies.
The report also mentions previous attempts to incorporate Bitcoin into state-level reserves, with initiatives in Montana, North Dakota, South Dakota, and Wyoming ultimately being abandoned due to concerns regarding financial stability and regulatory compliance.
Globally, central banks have largely remained cautious about using cryptocurrencies as part of their reserve portfolios. For example, the National Bank of Switzerland and Poland’s central bank have definitively ruled out Bitcoin as a reserve asset, while Singapore has expressed reservations about aligning it with long-term investment strategies. Similarly, the European Central Bank has criticized the idea of adopting Bitcoin in national reserves, arguing that its significant volatility and regulatory ambiguity make it a risky undertaking.
Market Pressure Amid Significant Capital Outflows
Market uncertainty related to the proposed U.S. crypto reserve is just one of several factors impacting the digital asset landscape. In February, Bitcoin experienced a sharp decline—falling by nearly 20%—coinciding with a record withdrawal of approximately $3.5 billion from Bitcoin investment funds. This unprecedented outflow marked the largest reduction in fund inflows since the introduction of Bitcoin ETFs.
JPMorgan analysts note that retail investors have played a significant role in the recent downturn. Furthermore, data from futures markets suggests that institutional players are beginning to reduce their positions in cryptocurrencies. This combination of events has led to an increase in short-selling activity, reinforcing bearish market trends.
Additionally, capital markets have shown signs of strain. Strategy’s recent $2 billion convertible debt issuance, coupled with a significant 40% drop in its share prices since their November peaks, and increasing debts among crypto miners, has raised concerns about oversaturated investor demand. Consequently, interest in new investments within the sector seems to be declining.
Analysts believe that, in the short term, without a clear positive catalyst, the crypto market will likely continue to face downward pressure and general uncertainty for investors seeking stability.
Tyler Matthews, known as “Crypto Cowboy,” is the newest voice at cryptovista360.com. With a solid finance background and a passion for technology, he has navigated the crypto world for over a decade. His writing simplifies complex blockchain trends with dry American humor. When not analyzing markets, he rides motorcycles, seeks great coffee, and crafts clever puns. Join Crypto Cowboy for sharp, down-to-earth crypto insights.