From McKinley Tariffs to Trump Cryptocurrency Reserves: The US Dollar and Cryptocurrencies Face New Challenges

President Trump has repeatedly praised the 25th President of the United States, William McKinley, for improving America "through tariffs and intelligence." Both of these U.S. presidents are known for their tariff policies, and now they will have another layer of connection between them. Trump has proposed establishing a U.S. cryptocurrency reserve, reminiscent of the struggle during the McKinley era to establish a currency system based on gold and silver. However, the current danger lies in the speculative bubble that poses a risk to the U.S. dollar, and the impending McKinley-style tariffs will only worsen people's suffering. Cryptocurrency reserves are uncharted territory for any country, including the United States. Trump has been vague about the details of how to establish a U.S. cryptocurrency reserve. But it is worth noting that, in addition to Bitcoin, Trump has specifically emphasized that, other than the core Bitcoin (BTC) and Ethereum (ETH), Ripple's XRP, Solana's SOL, and Cardano's ADA will be included in the U.S. cryptocurrency reserve. The U.S. government's unprecedented purchase of highly volatile and regulatory scrutiny cryptocurrency is a cause for concern. This in itself sets a chilling precedent: aside from the risks of potential losses, this behavior exacerbates concerns about fraud and corruption given Trump's family's close ties to cryptocurrency success. The broader impact is the politicized maneuvering triggered by the establishment of a U.S. cryptocurrency reserve. If Trump's proposal to establish a cryptocurrency reserve becomes reality, it may create a narrative with significant consequences, possibly giving legitimacy to the market's choice of cryptocurrency as a currency alternative, whether or not reasonable, by representing political support through the purchase of cryptocurrency (similar to the U.S. government's acquisition of silver in 1890). This politically supported speculative bubble will eventually pose a huge challenge to the U.S. dollar. Trump's proposal implies that people should sell their U.S. assets and buy cryptocurrency, which is undoubtedly risky given the forthcoming tariff pressures on the U.S. economy and the looming debt crisis caused by high debt levels, as mentioned by Ray Dalio, founder of Bridgewater Associates. Cryptocurrency briefly rallies then "dives" In the past week, the price of Bitcoin briefly fell below $80,000, essentially erasing most of the gains seen since the U.S. election in November. However, following Trump's announcement on March 2nd that he plans to establish a cryptocurrency reserve, cryptocurrencies including Bitcoin surged. Data from cryptocurrency data and analysis company CoinGecko shows that hours after Trump's announcement, the total market capitalization of the cryptocurrency market increased by about 10%, surpassing $300 billion. But the good times didn't last long, as cryptocurrencies began to drop significantly after the brief rally. According to Coindesk, as of the time of writing, the prices of Bitcoin and Ethereum are lower than before Trump's announcement. Ripple and Solana have almost completely given back the gains from the 2nd, and Cardano has also retraced most of its gains. Some analysts point out that there are many challenges at the operational level to include cryptocurrency in strategic reserves. If the Federal Reserve were to purchase cryptocurrency, it would lose its independence. If the U.S. Treasury used funds from government bonds or tax revenue to purchase cryptocurrency, it would require taxpayer approval and clear representation from Congress, otherwise raising issues of the legitimacy of funding sources and decision-making at the national governance level.