Crypto's Next Bubble Will Be Politically Motivated

Trump's proposed national reserve of cryptocurrencies, including bitcoin and memecoin-focused solana, is reminiscent of the fight for a monetary system backed by both silver and gold in McKinley's day. The danger today is of a speculative bubble with risks to the US dollar - with looming McKinley-esque tariffs also adding to the pain.

A crypto reserve is uncharted territory for any country, let alone the US, and Trump has been vague about the details. Still, his language goes beyond building a bitcoin stockpile or holding onto the US17-billion of crypto seized by US law enforcement.

His explicit citing of other tokens such as ripple suggests unprecedented government buying of digital coins that are hugely volatile and have been subject to regulatory scrutiny. It's a hair-raising precedent on its own: aside from the risk of loss, the Trumps have a stake in crypto's success - including via solana-based trumpcoin - and such antics will fuel concern about grift and corruption.

There are broader implications, though, stretching back to the politicisation of popular monetary crazes in the 1890s. Back then, "Silverites" - agricultural debtors struggling with falling prices - chafed at the US's shift to gold as the only commodity that could be accepted for dollars and called for a return to bimetallism.

While we're obviously a long way from declaring crypto legal tender, a US taxpayer backstop in digital-asset markets will make a lot of tokens seem safe bets. That brings more risk, more volatility and potentially more inequality if the price swings of trumpcoin or Javier Milei-linked memecoin libra are anything to go by.