Trump recently announced a Crypto Strategic Reserve However, there are mixed perceptions about what tokens it should hold, with the options listed being $BTC, $ETH, $XRP, $SOL, and $ADA. I believe that the reserve should hold only $BTC. Here's why

There's a clear argument that $BTC has a fixed supply unlike $ETH or $SOL, which have deflationary mechanisms but no cap on their supply. This creates guaranteed scarcity for Bitcoin. However, you can say the same thing about $XRP and $ADA because both have a fixed token supply as well. The differentiating factor is in their value proposition.

A lot more people understand the purpose of Bitcoin for wealth preservation, but not as many people can tell you the direct value offering of either $XRP or $ADA. This makes Bitcoin seem inherently more trustworthy. Crypto is just starting to become more widely accepted as an actual asset and not just something used by scammers or drug lords, so a positive perception through clear understanding of the value offering is a key to increased adoption.

Aside from social perception, it's important to consider how a crypto reserve can be defined as a commodity stockpile rather than a securities investment portfolio. Holding $BTC for the sake of having a reserve of this one asset can classify it directly as a commodity, like how the US maintains stockpiles of other commodities such as oil or gold.

While diversification of assets is good for investing, it's not ideal for a govt reserve. The idea of a reserve is to decrease reliance on other countries and create a stockpile of that specific asset for the US to have. If the govt holds a mix of different currencies, it becomes less of a stockpile and more of an investment, where it's propping up the prices of these assets to generate returns.

Lastly, it's important to discuss the impact of a large govt entity holding an asset powered by Proof-of-Work like $BTC, vs assets in Proof-of-Stake networks like $ETH. A PoS network is powered directly through liquidity provision (you stake your $ETH which provides money for the chain to operate), whereas PoW chains operate directly through the provision of computing power (you mine $BTC by making a computer do complex math). If the govt holds a huge surplus of $ETH and they decide to stake it, a huge portion of the underlying liquidity on the network will be provided by the govt itself, making Ethereum more susceptible to manipulation.

In a PoW network, the govt has no direct impact on network operations, even if they do hold a large supply of that asset. Mining $BTC is not as lucrative as just staking a large amount of $ETH because it requires much more effort to accomplish (setting up/maintaining miners, electricity costs, etc.). This means that the govt would far less likely to set up a bunch of $BTC mining operations and take majority control of the Bitcoin network rather than just stake their $ETH and become the largest underlying liquidity provider on the Ethereum network.

No matter which way you look at it, a Crypto Strategic Reserve is still a massive win for crypto. Imagine telling someone 5 years ago that the govt would be working on implementing a federal crypto stockpile. Bullish