Trump Day 3: No BTC reserve, but ‘crypto’ pardon begging galore

Getting your Trinity Audio player ready...

Day Three of Donald Trump’s presidency brought no crypto bombshells, although Democrats are badgering Republican colleagues to call out the president’s memecoin grifting.

• Still no reserve
• TRUMP memecoin still controversial
• Dems want committees to tackle TRUMP
• Justin Sun seeking Trump pardon?
• Vitalik Buterin wants Ethereum devs pardoned
• USDC loving TRUMP growth

Putting the ‘er’ in ‘strategic reserve’

Day Three of Trump 2.0 drew to a close with no sign of the president fulfilling his campaign pledge to establish a ‘strategic [BTC] stockpile’ aka the ‘strategic BTC reserve’ (SBR). While crypto bros continue to give Donald the benefit of the doubt, there are clearly some fraying nerves among those who really need Trump to deliver the goods.

Take Fred Thiel, CEO of BTC block reward mining outfit MARA (NASDAQ: MARA), who last year led his company down a dead-end road marked ‘BTC treasury strategy.’ Basically, MARA has been borrowing billions of dollars to buy BTC on the open market and sits on it, believing that each token will someday be capable of purchasing Greenland by itself.

On January 17, Thiel announced that MARA had imprinted an AI portrait of Trump’s face on the BTC blockchain visible via the network’s mempool explorer. Thiel called this the ‘Trump 47’ block, but if Trump noticed this fawning tribute he hasn’t commented on it publicly.

On January 21, Thiel announced he was “[f]ocusing now on bringing the [SBR] to all 50 states and the Federal government.” MARA is a co-founder of the Bitcoin Voter Project, which, since the conclusion of last year’s U.S. election, has kept itself busy tracking proposed SBR legislation in individual U.S. states (none of which has passed).

Brian Armstrong, CEO of the Coinbase (NASDAQ: COIN) exchange, posted his guide to increasing ‘economic freedom’ last week, which argued for establishing an SBR because BTC “will become central to national security in a world where holdings of [BTC] can shift the balance of power among nation states.”

Given that MicroStrategy (NASDAQ: MSTR) founder Michael Saylor now controls 2% of all the BTC that will ever exist—more when you consider how much BTC has been lost over the years—we urge Trump to invade Saylor as soon as possible. (He should be easier to take than Greenland or Panama, and the payoff will be HUGE.)

At the time this was written, the Polymarket prediction/betting site has a 34% chance of Trump establishing an SBR within his first 100 days in office. That figure stood at 48% on January 20. Rival prediction site Kalshi’s odds on Trump establishing an SBR this year are currently at 63%, down from around 70% a week ago.

Geoff Kendrick, head of digital assets research at Standard Chartered (NASDAQ: SCBFF), said this week that Trump needed to act soon or nervous BTC bros would start smashing the ‘sell’ button. “Hope is not a strategy … When hope dies, digital asset prices will fall 10-20%.”

TRUMP memecoin controversy not going away

After feigning ignorance Tuesday of the billions of dollars he’d earned (on paper) from last Friday’s launch of his $TRUMP memecoin, Trump’s personal social media accounts reposted several posts promoting his token. Despite this shilling, TRUMP’s token fiat value continues to slide, sitting at just above $37 as of Thursday morning.

A crypto tax software firm CoinLedger survey found that nearly 7.5% of crypto users had traded the $TRUMP token in the first two days it was available. Nearly 2% of users had traded $MELANIA, the token issued by Trump’s wife on January 19, during its first day of availability.

As a vivid illustration of the portal to hell that the Trump tokens have opened, entities have already filed applications for exchange-traded funds (ETFs) based on $TRUMP and some other memecoins, including DOGE and $BONK. Not so long ago, such a plan would be widely mocked. But up is down, black is white, and you’re either on this gravy train, or you get left at the station.

Consider Crypto Quant CEO Ki Young Ju, who was challenging the crypto community only last October to “name one meme coin that genuinely creates social value.” Fast forward to this week, and Ki was celebrating memecoins as “the spiritual energy of internet society” and praising Trump for “acting like a black hole pulling in speculative liquidity from retail crypto investors across the globe.”

Ki described the Trump administration’s new approach thusly: “If it’s inevitable, use them.” This view is shared by investor Mark Cuban, who likened crypto’s post-TRUMP mantra to a shoulder-shrugging “Mint it, print it, sell it F*ck it.”

Cuban followed that diss with a memecoin challenge, saying he’d issue his own token with the same terms as $TRUMP, but “All the revenue from the sale of the coins go to the US Treasury. The wallet address will be published so everyone can track it. If you want to gamble, gamble. But at least use it to make a dent in the US Debt[.] You in?” Cuban added: “If it’s a grift. Make it a grift to benefit all Americans.”

Even the Wall Street Journal’s editorial board cast a critical eye on Trump’s crypto boondoggle, saying the president “is inviting trouble with what looks like remarkably poor judgment.” Memecoins are a zero-sum game, so what will happen when many of his token buyers—including many of his political supporters—get burned?

The WSJ warned that “a business or foreign official with interests before the federal government might seek to curry favor with Mr. Trump by announcing plans to buy millions of his tokens to pump up the price … If Mr. Trump’s regulators then act in a way that aids crypto or the person seeking the favor, he’ll be accused of aiding the buyer in service of presidential self-dealing … Where are Mr. Trump’s lawyers?”

A recent survey showed a disturbing percentage of $TRUMP/$MELANIA buyers were first-time crypto buyers. This newbie feeding frenzy isn’t likely to end soon, as app store charts show crypto apps dominating the ‘finance’ categories (be they Android or Apple). God help us all.

But don’t worry. For instance, did you know the TRUMP token could solve America’s national debt crisis? God be praised!

Democrats demand committees take action

The controversy surrounding a sitting president actively promoting products intended to boost his bottom line isn’t going away. At a January 22 House of Representatives’ Financial Services Committee meeting, newly installed chairman Rep. French Hill (R-AR) outlined the administration’s goals for the current session.

Hill said Republicans would “bring legal clarity to digital assets, providing innovators with new tools to build decentralized financial products and services that can empower people to help one another and ensure that America will remain a leader in this financial technology.”

In a statement laying out the Committee’s agenda, Operation Choke Point 2.0 was mentioned, as the Committee pledged to “investigate the misuse of regulatory authority to prevent digital asset firms from accessing and maintaining banking services.” The Committee will also “monitor and evaluate the Federal Reserve’s previous efforts to research and develop a [central bank digital currency].”

However, the Committee’s ranking member, Rep. Maxine Waters (D-CA), used her opening statement to note Hill’s failure to mention Trump’s memecoin opening up “potential conflicts of interest that may put our national security at risk.” Waters warned that Trump’s token was “increasing his personal wealth and possibly providing a backdoor for sanctioned persons, hostile governments, and other bad actors to give money to Trump directly.”

Over at the House Oversight Committee, ranking member Rep. Gerard Connolly (D-VA) sent new chairman Rep. James Comer (R-KY) a letter on January 21 demanding “immediate action to investigate [Trump’s] grave conflicts of interest.”

Besides the $TRUMP token, Connolly cited the Trump family’s decentralized finance (DeFi) product, World Liberty Financial (WLF), as a “particularly troubling example” of Trump’s conflicts. Connolly noted that WLF’s largest investor is “a foreign entrepreneur under investigation by the Securities and Exchange Commission for alleged securities fraud.”

The said alleged fraudster is none other than Justin Sun, founder of the Tron blockchain, who has purchased at least $75 million of WLF’s ‘governance’ token WLFI. Sun’s purchases helped push total WLFI sales over the threshold that allows a Trump-linked entity to receive 75% of token sales.

WLF has acknowledged Sun’s generosity by using some of the funds it’s raised to purchase Tron’s TRX token, including another $2.65 million worth on January 21, raising WLF’s total TRX holdings to over $7.7 million. The day before, Donald’s son Eric began following Tron’s official X account.

WLF has also acquired $47.6 million worth of ‘wrapped’ BTC (wBTC), another token with ties to Sun. This makes you wonder how soon Sun might announce a ‘wrapped TRUMP’ token on Tron. Suspicions are already being raised as to the extent of Sun’s involvement in the Trump family’s crypto operations and what payoff Sun might be hoping to extract.

Pardon me, Justin?

A clue as to Sun’s motivations may have been raised in Connolly’s letter and its references to the SEC investigation into Sun’s alleged pump-and-dump tactics. Reports that the Department of Justice (DoJ) is conducting a criminal probe into Sun’s activities have circulated for years, which may be why Sun hasn’t appeared to have set foot on U.S. soil since the pandemic.

On January 21, Trump fulfilled a campaign pledge by pardoning Ross Ulbricht, founder of the BTC-powered Silk Road dark web marketplace that sold everything from illegal narcotics to illegal weapons. Following the pardon, the controversial X user Rothmus suggested that Roger Ver—currently in Spain awaiting trial on charges of mail fraud and tax evasion—should also receive a pardon.

Trump’s ‘first buddy’ Elon Musk replied to this appeal by saying: “Will inquire”. Musk, who claims to have been “in the Oval Office” when Trump signed Ulbricht’s pardon, later clarified that pardon decisions were “up to the President, but I have asked whether [pardoning Ver] was possible.”

Musk’s ability to influence Trump on clemency matters has sparked speculation about who might be next. Ver’s odds of receiving a pardon in Trump’s first 100 days in office are currently standing at 32% on Polymarket. So far, the only other pure crypto figure in the hunt is disgraced FTX founder Sam Bankman-Fried (4%), although we suppose Julian Assange  (24%) might qualify due to his embrace of the BTC token.

Justin Sun has yet to make the Polymarket list but that’s likely due to his relative anonymity next to the other candidates. Should a pardon be issued, we’ll have established a financial benchmark for the right to lie, cheat and steal with impunity. Fun times.

Free Kim Jong-un!

Another crypto voice angling for Trump to pardon his pals is Ethereum co-founder Vitalik Buterin, who responded to news of Ulbricht’s pardon by tweeting “No man left behind.” Buterin tagged Roman Storm and Alexei Pertsev, developers of the Ethereum-based Tornado Cash, a coin-mixing service that allows users to obfuscate ETH tokens’ blockchain history.

Roman Storm was charged with money laundering and sanctions evasion in August 2023 in connection with North Korean hacking groups using Tornado Cash to launder their ill-gotten gains. Storm is currently in U.S. custody, while Pertsev is in a Dutch prison after being sentenced to 64 months last May.

Buterin noted a January 21 ruling related to Tornado Cash in the U.S. Court of Appeals for the Fifth Circuit. Last November, the same court found fault with the Treasury Department’s Office of Foreign Assets Control (OFAC) for applying sanctions to the smart contracts powering the mixer (and the developers who wrote them). The court now ruled that the smart contracts aren’t ‘property’ and are thus beyond OFAC’s authority to sanction. The court lifted the sanctions and sent the case back to the lower court for further arguing.

Buterin later tweeted “Free Virgil”, a reference to Virgil Griffith, the Ethereum developer who was sentenced to 63 months in prison in April 2022. Griffith traveled to North Korea in 2019 to give the regime pointers on how blockchain tech could help them evade sanctions. This trip defied advance warnings by U.S. authorities that they wouldn’t look kindly on such shenanigans, but Griffith chose to go anyway.

Trump framed his Ulbricht pardon as a payoff to “the Libertarian Movement, which supported me so strongly,” while Sun is putting tens of millions of dollars in Trump’s pocket. What does Buterin have to offer in return for not one but three crypto pardons?

Plenty, if you ask Ethereum co-founder Joe Lubin, who noted the over 56,000 ETH (worth ~$182 million) that WLF has acquired, while WLF also registered some .eth domain names associated with Trump family members, including Donald’s sons Eric and Barron. This led Lubin to claim that WLF “is 100% Ethereum aligned.”

Lubin justified this declaration by claiming that “the Trump family will build one or more giant businesses on Ethereum … The Trump administration will do what is good for the USA, and that will involve ETH, considerations of how the USA can support Ethereum … and perhaps eventually use Ethereum technology in government activities just as they currently use the internet and web protocols.”

That’s some pretty bold future-surfing given that Ethereum is currently undergoing a ‘civil war’ that has seen senior developers leaving the project, the apparent launch of a rival to the Ethereum Foundation in charge of network developments, and Buterin telling the community that he’s in charge so sit down and shut up. Bullish.

But don’t worry, Ethereum fans. Justin Sun is here to solve all your problems.

USDC for the win

Lubin’s self-interested optimism also belies the fact that Donald and Melania chose to issue their tokens on the Solana network, not Ethereum. Solana’s transaction volume spiked following the token launches, leading to serious network congestion and transaction delays. Nonetheless, somehow, Solana managed to avoid another outage requiring a full restart.

But the real winner, not named Trump, appears to be USDC, the dollar-denominated stablecoin issued by Circle in a partnership with Coinbase (which drew customers’ ire when its wonky infrastructure led to a days-long backlog of Solana transactions).

When Trump issued his memecoin, USDC’s market cap was sitting around $46.5 billion. Five days later, that cap has hit $51.5 billion, only ~10% off its all-time high in mid-2022. Much of that growth has come via USDC issued on Solana, fueling the most active trading pairs. By contrast, USDT, the market-leading stable issued by Tether, has gained only around $1 billion over the same period, raising its cap to $138.5 billion.

Coinbase’s Armstrong recently suggested his exchange could prevent U.S. users from accessing USDT, as it recently did in Europe, to comply with stablecoin legislation expected to be approved by Congress in the current session. The gist is that Tether would be unable to abide by the legislation’s requirements, including subjecting its reserve assets to independent audits, something Tether has steadfastly refused to do.

In response to Armstrong’s musings, Tether CEO Paolo Ardoino tweeted (in Italian) “More and more I feel like the black knight.” We really hope Ardoino was referencing the black knight of Monty Python & The Holy Grail fame, who suffers the loss of all four limbs in a duel with King Arthur and yet refuses to concede that he’s beaten.

In the end, Arthur just went around the crippled knight, much as USDC appears to be preparing to assume the dominant role in regulated markets, relegating Tether to its crime coin status. That is unless Tether’s friend in D.C., Howard Lutnick—Trump’s nominee for Commerce secretary—can somehow lobby Trump to ensure a USDT carveout before Congress can vote on any stablecoin bill.

Watch: Teranode is the digital backbone of Bitcoin