Hi YXI friends,

Given the last week’s development of Strategic Bitcoin Reserve and the volatile price action, I think it’s worth doing another update on Crypto. I lean towards having Crypto updated weekly in this service - please vote “Yes” to the poll at the end if you would also like this frequency.

Today, we will go through the Strategic Bitcoin Reserve, some of the misconceptions, its long-term implications, and whether other countries should follow US’ footsteps.

We will also review Bitcoin from a liquidity point of view, as well as the key price levels it needs to reclaim for the bullish trend to return. We also walk through the price technicals of ETH, SOL, XRP, COIN, and MSTR.

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Table of Contents

• 1. Strategic Bitcoin Reserve (SBR)

  • Strategic Bitcoin Reserve (SBR)

  • Digital Asset Stockpile (DAS)

• 2. Bitcoin (BTC)

  • G5 M2 Money Supply vs Bitcoin (BTC)

  • Why $95k Is Key

  • Bitcoin (BTC) Technical Analysis

• 3. Ethereum (ETH), Solana (SOL), Ripple (XRP)

• 4. Coinbase (COIN), Strategy (MSTR)

DISCLAIMER: This newsletter is strictly educational. Any information or analysis in this note is not an offer to sell or the solicitation of an offer to buy any securities. Nothing in this note is intended to be investment advice and nor should it be relied upon to make investment decisions. Any opinions, analyses, or probabilities expressed in this note are those of the author as of the note's date of publication and are subject to change without notice.

1. Strategic Bitcoin Reserve (SBR)

In Trump’s Executive Order on March 6, 2025 established two separate mechanisms for the US crypto holdings.

Strategic Bitcoin Reserve (SBR)

Firstly, we have a Strategic Bitcoin Reserve (SBR). The most important principle in the Executive Order is that Bitcoin will be treated “as a reserve asset”. This elevates Bitcoin to the same status as Gold. It means that the US will not sell bitcoin deposited into the SBR, which will be “maintained as a store of reserve assets”.

Bitcoin is deemed to be more special than other crypto assets, as it is scarce, secure, and has never been hacked.

SBR will initially be capitalised by Bitcoins already owned by the US Treasury from proceeds of criminal prosecutions. Further Bitcoin acquisitions will be budget neutral, imposing no incremental costs on the taxpayers. This means the US government will not issue debt fund Bitcoin purchases.

“Budget Neutral”

I think this is already a popularly misunderstood point, as many investors are taking this to mean the US won’t buy more Bitcoins actively. This confusion stems from the fact that the government has not yet clarified what the “budget neutral strategies” are.

The Treasury cannot issue new debt specifically for buying Bitcoin. This is because new debt leads to interest payments, which would be incremental costs to taxpayers. It responds to the potential criticism that the government is “wasting taxpayer money” on crypto, which is an extraordinarily volatile asset class.

While “budget neutral” means not adding more cost to the planned budget, the government can make room within the budget for Bitcoin purchases.

For example, the Treasury can use existing fund savings, such as from DOGE, or sale of other assets (not limited to crypto, e.g. buildings) to fund Bitcoin purchases.

If the US budget ever becomes balanced, the government can also fund Bitcoin purchases through surplus tax receipts.

Theoretically, the government can sell some of its Gold reserve (assuming the Gold is actually still there) to fund Bitcoin purchases. I do think this is an extremely unlikely option, because of the nature of it being a reserve asset (just like Bitcoin now). Also, US would be selling into the aggressive buying of BRICS nations, which is less favourable to the US and more favourable to its competitors.

Will Other Countries Follow?

I think the skepticism toward Bitcoin is uneven across other nations. China, for example, has banned Bitcoin and Bitcoin mining for years, denouncing crypto tokens as scams, while promoting its own centrally issued Digital RMB.

The US first mover advantage is a big one, regardless of the attitudes of the others. However, once other nations identify this advantage, they should seriously consider Bitcoin as a Reserve option too.

Here we must talk about Gold. The US historically accumulated as much as 20,000 tonnes of Gold during WW2. In 1944, the US held over 70% of the world’s gold reserves. This cemented the US financial dominance, with the US Dollar backed by Gold under Bretton Woods after the war.

But even after the end of Bretton Woods under Nixon, the US still holds 8100 tonnes of Gold, whose price has shot up spectacularly over the past half century. As a percentage of US Reserves in Dollar value, Gold has moved up from 55% in 2000 to 76% in 2024. US Gold holding is nearly quadruple that of China, who is trying to rapidly accumulate more Gold in recent years.

As the US repeats this first mover advantage in Bitcoin, Bitcoin’s special Reserve status will be recognised and spread over time. Contrary to the popular opinion that Bitcoin destroys the US Dollar, Bitcoin can actually help solidify the US Dollar’s position as a Reserve currency like Gold historically did. The Dollar and the stablecoins are media of exchange, while Gold and Bitcoin act as a store of value.

It would be unwise for other countries to become late buyers and ignore Bitcoin until its price has more than 10x’d. (Bitcoin’s current market cap is about 10% of Gold.)

Digital Asset Stockpile (DAS)

The second part of the Executive Order talks about a US Digital Asset Stockpile (DAS). This is separate to the SBR. It includes non-Bitcoin crypto tokens that the government already owns from seized criminal assets. There are two key differences between the SBR and the DAS.

While the Treasury can acquire more Bitcoin through budget neutral strategies, it will not acquire additional assets for the DAS beyond the forfeiture proceedings. And unlike the “no sales” clause for Bitcoin, the Treasury can choose to sell assets in the DAS.

This means the Treasury could choose to sell its ETH, SOL, and XRP too boost its Bitcoin holdings, but not the other way round. Overtime, I suspect the Bitcoin / Ether spread will widen. (Crypto players use ETH/ BTC ratio, which is just the opposite ratio).

2. Bitcoin (BTC)

G5 M2 Money Supply vs Bitcoin (BTC)

We use the G5 (US, China, EU, Japan, UK) M2 Money Supply to approximate the changing dynamics of global liquidity. The true comprehensive set of measures is broader, including other countries M2s, high quality bond collaterals, and FX swaps, but what we track here already holds high explanatory power, without getting overcomplicated.

We observe that Bitcoin moves directionally in line with the rise and fall of the G5 M2 Money Supply denominated in US Dollars, but with an 11-week lag. Note that this relationship is not predictive of the extent of Bitcoin’s moves, as its sensitivity evolves over time.

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