Analysts Doubt US Crypto Reserve Expansion Beyond Bitcoin, Cite Funding Challenges

Analysts at Bernstein have raised concerns that expanding the proposed U.S. Crypto Strategic Reserve to include blockchain assets beyond Bitcoin BTC/USD using Federal Reserve or Treasury funds faces significant hurdles, despite a bullish market response to President Donald Trump's weekend announcement.

The reserve, unveiled ahead of Trump's Crypto Summit scheduled for Friday, includes five digital assets—Bitcoin, Ethereum ETH/USD, Solana SOL/USD, Ripple XRP/USD, and Cardano ADA/USD—sparking debate over its feasibility and funding.

While Bitcoin's inclusion aligns with its “digital gold” narrative, the rationale for other assets remains murky, Bernstein noted.

Also Read: Trading Agents Lead AI-Web3 Future, Says Galxe Co-Founder Charles Wayn

The announcement triggered a sharp market rally. Bitcoin climbed above $94,000 (up 12%), while Ethereum gained 15%. Meanwhile, Solana, XRP, and Cardano surged 25%, 30%, and 70%, respectively, from last week's lows.

Yet, Bernstein analysts argue that justifying federal purchases of non-Bitcoin assets is a tough sell.

"We think a realistic path could be that the U.S. government can convince 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," they wrote in the report.

The analysts outlined three unresolved questions surrounding the reserve: allocation across assets, funding mechanisms, and legal authority.

On allocation, they suggest market capitalization could guide weights—Bitcoin at 75%, Ethereum at 11% and Solana at 4%. Or, perhaps, a dedicated committee could decide and split the rest among others

Funding, however, poses a deeper challenge. Proposals include reallocating gold reserves, issuing Treasury debt, adjusting the Fed's balance sheet, or partnering with institutional asset managers.

Critics highlight a contradiction with the DOGE program's spending cuts, questioning the diversion of resources to crypto investments.

Legally, the reserve's creation is uncertain. "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 analysts stated.

They doubt the Treasury could act independently without Fed involvement. That further complicates the inclusion of assets like ETH and SOL, which support blockchain ecosystems but lack Bitcoin's reserve-asset clarity.

Despite these challenges, the crypto industry welcomes the sentiment shift.

The SEC's recent withdrawal of enforcement actions against firms like Coinbase COIN and Binance signals regulatory softening, while Bernstein predicts the reserve could push rival nations and banks to embrace crypto innovation.

MicroStrategy MSTR, holding nearly 500,000 BTC ($47 billion), stands to gain, with its stock potentially buoyed by enhanced capital market access.

Geoffrey Kendrick of Standard Chartered, in a note sent to Benzinga, said that the timing of the announcement is interesting. February was the worst month for Bitcoin since June 2022. That’s a pretty bad look for the new pro-crypto administration. However, the weekend was the best weekend since January 2021.

“That combination (worst month in 2.5 years, best weekend in 4 years) looks to me like the first solid data point of a Trump put for crypto (ala Fed put for stocks). This is important because it means markets can remove the fat left-hand side tail from their implied distribution of outcomes,” he said.

“And removing bad outcomes after a week which saw $3bn in liquidations of long positions on exchanges and $2.5bn of ETF selling is probably enough to mean markets can now edge higher,” he added.

It also gives a states a chance to progress their own BTC reserve plans. These will take time but seem likely to end up with the states owning as much Bitcoin as the federal government currently does — approximately 200,000 Bitcoin.

“And perhaps a bridge to a place where other sovereigns join Abu Dhabi in buying BTC as well. We have moved from selling rallies to buying dips. And hence I re-focus on my $500k BTC target,” Kendrick said.

Read Next: