A Digital Fort Knox for Crypto

President Trump recently signed an Executive Order to establish a US official government cryptocurrency reserve. This will be known as the Strategic Bitcoin Reserve, as well as a Digital Asset Stockpile.

The reserves will be funded with existing ‘coins’ recovered by the Federal Government. David Sacks, a former PayPal chief operating officer and President Trump’s artificial intelligence and crypto czar, likened them to a ‘digital Fort Knox for the cryptocurrency.’ He has also ordered a full audit of the existing US cryptocurrency reserves, which is believed to include at least 200,000 Bitcoin with a value of over $17.5bn!

However, one cryptocurrency hedge fund manager described the announcement as a ‘pig in lipstick,’ saying ‘no active buying of cryptocurrencies means this is just a fancy title for Bitcoin holdings that already existed with the government.’

Many countries maintain strategic reserves – The US and many countries already have a petroleum reserve. Others have reserves of natural resources, and Canada even has a maple syrup reserve!

So, is the US cryptocurrency reserve a good idea?

Clearly fans of Bitcoin are pleased, albeit some do not appear happy with the other four coins that have been included in the reserve. However, the value of the five coins concerned in the reserve – Bitcoin, Ethereum, XRP, Solana and Cardano initially rose on the news.

The fact that the cryptocurrency reserve is being set up from the recovered proceeds of crime is a reminder of the risk! Trump’s Executive Order coincided with news that hackers, known as Lazarus Group, and thought to be working for the North Korean regime, successfully converted $300m of their record-breaking $1.5bn heist from crypto exchange ByBit into cash and unrecoverable funds.

Will this bother Trump? We doubt it, given Trump’s apparent endorsement of a new meme-coin – $Trump, calling it ‘The Greatest of them all.’ The venture has faced widespread criticism due to it being an unregulated activity that could present a conflict of interest with his presidential role.

Meanwhile, given the ‘dark side’ of cryptocurrencies, such as North Korea laundering crypto to fund its military, will central banks, particularly the US Federal Reserve, be so quick to jump aboard Trump’s cryptocurrency gravy train?

What have we been watching?

Trump tariffs continue to cast a shadow across global equity markets. The OECD trimmed its global economic growth forecast for both 2025 and 2026 from 3.3% to 3.1% and 3.0% respectively. It cut its US economic growth forecast for 2025 to 2.2% and for 2026 to 1.6%. The OECD warned that a global economic slowdown will be more severe if Trump goes ahead with further planned tariffs from 2nd April.

The recent sharp fall in US equities has led many to hope that Trump might ease up on his tariff threats, so investors were disappointed to hear US Treasury Secretary Scott Bessant say that ‘market corrections are healthy.’ However, markets are still clinging to the hope that tariffs imposed on 2nd April will not be as bad as feared. Trump is no doubt hoping that some countries ‘blink first’. For example, media reports suggest that the UK government is prepared to offer a £700m tax break for US tech giants in the hope of escaping Trump tariffs. Markets have also latched onto Trump’s latest comments in which he suggested some possible tariff flexibility. ‘Sometimes it’s flexibility. So, there’ll be flexibility, but basically it’s reciprocal.’

It was an important week for central banks, with half of the G10 group of currencies having meetings, including the Federal Reserve (Fed), the Bank of England (BoE) and Bank of Japan (BoJ). The vast majority were expected to leave interest rates unchanged, and so it proved to be the case, with US trade tariff uncertainty the main rationale.

The two-month ceasefire in Gaza collapsed as the IDF re-commenced attacks against Hamas, having failed to recover all its hostages or to destroy the terrorist organisation. Meanwhile, Putin has given Trump the bare minimum to enable him to claim that he has made progress towards peace in Ukraine. Russia said it wants peace but is still carrying out drone and missile strikes on civilian targets while quibbling over how a non-existent ceasefire might be monitored. It is also demanding the flow of military and intelligence support to Ukraine from its allies cease, which would cripple Kyiv’s ability to resist. US and Russian officials are holding further talks in Saudi Arabia this week.

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In the UK, the Bank of England (BoE) kept interest rates on hold at 4.5% as expected in an 8-1 vote. The market is expecting at least two interest rate cuts this year, albeit the BoE looks caught between a rock and a hard place with global tariff uncertainty, a flatlining economy and inflation predicted to be 3.75% in the third quarter. Ahead of the Spring Statement on 26th March, the government announced a suite of benefit reforms which it believes will save over £5bn by 2029-30. Rachel Reeves is also looking to cut the civil service bill by 15% by the end of the decade. The Chancellor is already looking on a ‘sticky wicket’ with higher- than- expected government borrowing in February, while reports suggest the OBR is likely to cut its UK economic growth forecast from 2% to 1%.

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German politicians voted through a huge increase in defence and infrastructure spending. This will exempt spending on defence and security from Germany’s strict debt rules and create a €500bn infrastructure fund.

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In the US, the Fed left interest rates unchanged at between 4.25%- 4.5%. The Fed flagged tariff uncertainty and cut its US economic growth forecast from 2.1% to 1.7%. Markets are expecting two 0.25% interest rate cuts from the Fed this year. However, the Fed is to lower the amount of Treasuries allowed to mature without being reinvested to $5bn from $25bn but the cap for mortgage-backed securities will be left unchanged at $35bn. There was more disappointing US economic news with the New York State manufacturing index plunging 25 points to minus 20 in March with new orders dropping sharply. Meanwhile, US retail sales grew by 0.2% in February, which was weaker than expected.

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The Bank of Japan left its key interest rate on hold at 0.5% as widely expected given the global uncertainty fuelled by the threats of more US trade tariffs.

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In China, Premier Li Qiang called for a more ‘proactive fiscal policy’ as Beijing set an increased deficit-to-GDP target of 4% from last year’s 3%. Analysts see China as needing to drive domestic growth through further stimulus to make up for the loss of demand from the US due to tariffs. The authorities have therefore announced a ‘Special Action Plan to Boost Consumption’.

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Brent oil edged higher to $72 following tighter US sanctions on Iran and an OPEC+ plan for additional cuts to compensate for recent overproduction by Kazakhstan and Iraq.

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Finally, an example of inflation and why water companies are asking us to pay higher bills. In 1951, Bristol Water started construction of the Chew Valley Reservoir near Cheddar, which eventually cost about £1.75m. Recently, Pennon, which now owns Bristol Water, announced plans to build a new reservoir near the existing one to supply 40,000 homes. This will cost an estimated £500m!

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Read Last Week’s Alpha Bites – HELLSCAPE -The defence of Taiwan

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Alpha Portfolio Management is a trading name of R C Brown Investment Management PLC which is authorised and regulated by the Financial Conduct Authority.