Compiled by: Carine W.

"Trump's influence on markets cannot be underestimated. I learned from his first term: never act against Trump's tweets and statements."

Host: Jonah Van Bourg, crude oil & cryptocurrency trader; Avi Felman, host of the 1000x Podcast

Podcast Source:1000x Podcast

Original Title: What A U.S Strategic Reserve Means For Crypto?

Air Date: March 4, 2025

Key Points Summary

This podcast episode explores the following main topics:

Market Volatility and U.S. Crypto Strategic Reserve

• Bitcoin price experienced significant volatility, dropping nearly 20% before rebounding 18-19%

• Trump announced the establishment of a U.S. crypto strategic reserve, triggering a short-term market rebound

• The reserve will include Bitcoin, Ethereum, XRP, and Cardano among other cryptocurrencies

• If the strategic reserve size is only $500 million, Bitcoin price may quickly return to the 80K range

Market Technical Analysis and Trading Strategies

• Bitcoin typically declines after consolidating at high levels

• Capital inflow data shows this rebound was primarily driven by spot purchases rather than leverage

• Hedging strategies (long certain altcoins while shorting BTC) perform well in the current market environment

• Bitcoin below 80K is viewed as an "extreme value" zone, while the 95K area has not yet established value consensus

Trump's Influence on Markets

• Trump has historically significantly influenced markets through tweets and statements

• The "Trump effect" on crypto markets is gradually diminishing

• Friday's crypto summit could be a key factor for short-term market direction

• Government purchase of cryptocurrencies may require congressional approval, making the legislative process crucial

Ethereum's Poor Performance

• ETH/BTC ratio continues to decline, with Ethereum performing far worse than Bitcoin

• Ethereum faces significant selling pressure with little buyer support

• Major sellers include the Ethereum Foundation and investors who entered the market in 2021

Future Market Expectations

• The short-term market may continue to be chaotic, unsuitable for short-term trading

• The long-term outlook for Bitcoin remains positive, potentially reaching 150-200K this year

• Congressional legislative process will be a key factor affecting the market

• Democratic Party is softening its stance on crypto, recognizing they missed opportunities to embrace the industry earlier

Impact of Strategic Reserve on the Market

Avi: The market has been absolutely crazy. Bitcoin experienced four consecutive days of decline, paused for a day, then crashed 10% on the fifth day, and now it's up 15%. From the low to where we are now, it's up about 18-19%, but we're still only around 93K, not even back in the previous range. This is truly insane price action.

Jonah: What's going on? Is there some major news?

Avi: Last week I mentioned how rare it is for Bitcoin to consolidate at highs without breaking down. I wasn't expecting a straight 20% drop over four days though, I thought it would be more choppy. I turned bullish around the mid to low 80Ks, and then we got that final flush down to 78K, which I think was actually good for Bitcoin. A lot of investors who were waiting for levels below 80K to step in got tremendous volume, and then the price reversed so quickly that those waiting to enter didn't even have time to get in.

And those who sold are very likely investors who panicked but still want to own Bitcoin, they were just afraid of further price drops into the 60K range. From a technical perspective, we're in quite a good market position, not to mention the president's announcement about the crypto strategic reserve. What's going on with that?

Jonah: I didn't touch my positions throughout the entire sell-off, just watched from the sidelines, tweeting less, maybe a bit panicked but not really concerned as I didn't expect a complete breakdown. This wasn't in my expectations at all - I thought the market would steadily grind higher as the regulatory environment improved.

I don't think this crypto news will actually herald the beginning of a new bull market where we just keep going up for another six months. I think this might get sold into for a while, then bottom out, and then we'll continue rallying. There's a crypto summit coming on March 7th.

Avi: I think this private summit is similar to other catalysts around Trump. When he spoke at the Bitcoin conference, we saw a big rally followed by a sell-off. Many people are excited about this strategic reserve idea. I must say, it is big news, especially for Solana, XRP, and Cardano since Trump mentioned them directly. Mentioning Cardano is particularly surprising.

Jonah: It's not that surprising actually. If you look at CoinGecko's top non-stablecoins, you see: Bitcoin, Ethereum, XRP (love it or hate it, this "vaporware" project is worth almost $300 billion), then stablecoin Tether, followed by BNB (which is a "China coin" and Trump doesn't like China), then Solana, USDC, and Cardano at $50 billion. After that comes Doge and various other projects. Honestly, aren't these just the top cryptocurrencies except for the "China coin"?

Avi: You have a point, but I do think that if the government is going to buy crypto, they should probably focus on projects that are actually useful and have real potential. It's a strange argument for me because we should step back and ask: why would the government want to buy useless vaporware assets with no real users, future, or value? Don't they do any research?

Jonah: I completely agree with you, Avi. Cardano represents everything that would make both of us want to leave crypto. If Trump wanted to message this properly, he should say we're creating a strategic crypto reserve primarily with Bitcoin, plus some Ethereum and Solana because they have traction. Then include XRP and Cardano because of their market caps.

But it's hard to justify cutting funding for U.S. scientific agencies claiming the country is going bankrupt, while simultaneously announcing plans to use taxpayer money to buy Cardano.

Avi: There are two paths that could lead to higher prices. Unless at Friday's crypto summit they announce that the U.S. is allocating tens of billions of dollars to Bitcoin, I don't think we'll go higher. That's the threshold: are we getting more details in the next seven days that the U.S. will be allocating tens of billions of dollars? If the crypto strategic reserve turns out to be only $500 million, we'll quickly return to the 80K range.

Jonah: If they announce that, they'd worsen their fill price significantly. That would be crazy - I wonder if they're really that stupid. Given how bad the messaging has been, the answer might be yes, they are that stupid.

Bitcoin: Value and Momentum

Jonah: Last Friday, S&P 500 futures fell sharply, marking the biggest drop of 2025 so far. Although the stock market experienced similar volatility in 2024, overall markets have become more unstable. In contrast, Bitcoin didn't crash like the S&P 500 and has remained relatively resilient.

Avi: I've been using the value and momentum analytical framework. Currently, we need investors to rediscover Bitcoin's value, and I think that's happening. The market generally views levels below 80K as extreme value zones for Bitcoin, which is why we didn't spend much time below 80K. The small trading range near 95K isn't viewed as a value area, so there's not enough momentum to attract buyers.

Momentum is primarily generated through news catalysts. If Trump announces that the U.S. will purchase large amounts of Bitcoin, this will immediately create upward momentum; otherwise, we must rely on value support. And how do you establish perceived value? By trading in a specific price range for a sufficient period of time.

Right now, 85K isn't seen as a particularly attractive value area because we just traded there. But if we stabilize above 90K for two months and then pull back to 85K, that level suddenly becomes a "discount," significantly more attractive to investors.

Currently, the clear value area is below 80K - you can confidently buy Bitcoin below 80K, and I believe you'll be happy with that decision a year from now. Of course, this also means you likely won't get that opportunity. But I also think 95K isn't a value area. Therefore, without major positive news, I expect we might oscillate between 85K and 95K for at least a month.

Jonah: I agree with some of your points but disagree with others. I agree that traders anchor to prices where assets trade sideways for extended periods. If we trade around 100K for three months, participants will anchor to that level. Then if trading at 80K, it looks cheap; if at 120K, people take profits.

However, regarding your statement about crypto rarely consolidating at highs without selling off afterward - while I agree it's true, it feels somewhat misleading. Essentially, you're saying: crypto goes up, then stops going up, and afterward it either continues up or goes down. If it doesn't continue up, then it goes down. This seems somewhat self-evident.

The Trump Effect: Policy Announcements and Market Reactions

Avi: I remember when we discussed how Trump's effect on Bitcoin would be similar to Elon's effect on Doge. Initially, everyone bought Doge because Elon might say something about it on Twitter that could drive the price up. Now that Trump has adopted Bitcoin as his pet project, the pattern is similar. This has played out nicely, so now we're entering the next phase of decay - each time he mentions crypto, the impact diminishes. He needs to take concrete action now.

Notably, we knew on February 28th that the first-ever White House crypto summit was coming the following week, while the crypto market was melting down. I wish I had thought: Trump is highly likely to do something to prevent this summit from looking like a complete failure. It's worth watching the White House calendar now - whenever trading any asset, you should probably check the White House schedule and consider whether Trump has incentives to help or hinder your trade.

Jonah: You make an excellent point comparing Musk and Trump's market influence. From my trading experience during Trump's first term, I learned a profound lesson: never act against Trump's tweets and statements.

Trump had an enormous impact on markets during his first term. During the COVID pandemic when oil prices were low, he caused oil prices to spike 30-40% in a single day by announcing he would force OPEC to cut production. This was an extremely rare surge for a non-crypto commodity. When prices were high, he publicly pressured OPEC daily to stop production cuts, and he actually did it. He wanted oil in a specific range, so he'd tweet bearishly at the top of the range and bullishly at the bottom. For the stock market, he tweeted bullishly at every opportunity: "record highs," "going higher," "more Trump tax cuts," "Trump bump," etc.

You saw crypto violently rally after his strategic crypto reserve tweet. What I'm saying is, that move has already happened - I don't expect him to tweet some brand new ultra-bullish catalyst on Friday that sends us another $10,000 higher. The tweet was the tweet, and it came out today.

I remain very bullish on crypto - I think we'll easily reach $150K by year-end, maybe $200K. If I were a short-term trader, I might sell Bitcoin here to buy back around 87K, but that's not my trading style.

Democrats and Crypto Policy

Avi：

Democrats are beginning to have their awakening regarding cryptocurrency. At least two people I know in the Democratic apparatus have contacted me about possibly writing an op-ed on how Democrats mishandled crypto, because they both realize that cryptocurrency largely emerged from the Occupy Wall Street movement, which was entirely a Democrat-supported movement.

15 years ago, the idea of opposing big banks was exclusively Democratic. Distrusting financial institutions, Goldman Sachs, and JPMorgan was entirely a Democratic mindset. So they had a real opportunity. That's why if you look back at Ethereum's origins, many key participants, even today, are still Democratic supporters. I think Bitcoin may have always leaned more libertarian, but if Democrats had just gone with the flow instead of trying to kill it, they could have done well in the crypto space.

I think they're starting to realize this now. So I believe they'll soften their stance because it's simply not a winning political issue for them.

Ethereum's Poor Performance

Avi: Ethereum's performance has been terrible - ETH is trading at only $2430 now, which is just awful.

Jonah: Exactly, I won't be touching Ethereum again in the short term.

Avi: To be honest, I recently tried a strategy: going long altcoins while shorting BTC. This strategy actually worked quite well. Many altcoins bottomed out relative to Bitcoin, especially some AI coins I was heavily invested in, like ARC, Virtuals, AI16, and AIXBT. These coins have performed excellently against Bitcoin recently. I also established a significant long position in SOL, also hedged against BTC. But I basically had to eliminate the ETH/BTC portion of my portfolio.

Jonah: ETH/BTC has been performing terribly - what's going on with it?

Avi: Man, I really had to cut it. I kept all my other positions, but had to reduce this one 24 hours after establishing it because even during market turbulence, ETH completely failed to perform. The most surprising thing is how few people are willing to buy this asset. I originally thought sellers had exhausted themselves, which might be true, but what I completely misjudged was that there are virtually zero buyers for this asset.

Jonah: Not only that, but there are major sellers, including the Ethereum Foundation and everyone who entered the crypto market in 2021 but hasn't checked their portfolio until now. Ethereum consistently trades heavily.

Observations About Cardano

Avi: Regarding Cardano, it's interesting that it's actually held by the most ordinary people. Trump might be trying to appeal to the average person - he wants to make ordinary Americans who hold crypto wealthy. Many Americans do own Cardano. Today I spoke with someone who said: "You're into crypto, right? I've held some Bitcoin and Cardano for four years now, what do you think I should do?" I told him he should absolutely sell Cardano and move into something else, because today is a good day to sell Cardano. But ordinary people do own Cardano.

Market Fund Structure Analysis

Avi: One particularly good sign is that this rally has seen virtually no increase in Open Interest (OI). Looking at futures, one of the highest hit-rate reversal signals is when large numbers of people pile in with leverage. This rally appears to be spot-driven - it looks like people are deploying cash into this rally rather than just speculators buying with leverage, which is a very good sign for Bitcoin.

Jonah: There's another interpretation - it could be cash, which would explain the lack of OI increase, or it could be heavy market maker trading without real position building, just high-frequency trading activity driven by volatility.

Avi: Looking at funding rates, it does appear that a significant number of shorts entered on Saturday. One of life's greatest techniques is staying attentive during weekends. It's easy to monitor these things during the week and then completely ignore them on weekends, but if you observe during weekends, you gain a huge edge. Many significant events in this market over the past year happened on weekends.

Future Market Outlook

Jonah: I think this market will continue to be chaotic for a while. I don't think this is a good market for short-term traders with a 2-7 day horizon. I feel unprecedented uncertainty about the short term, unprecedented conviction about the long term, and about 6-8 out of 10 confidence that we'll likely be higher in the medium term (6 months).

Apart from some tactical opportunities, like when news comes out but coin prices haven't moved yet and you can trade the news and some slower-reacting assets, I don't think this is a market where you want to be very active. Once we gain more clarity about the Trump administration's crypto policies, the market will enter a healthier, more stable trading environment.