Cryptocurrency markets surged following US President Donald Trump’s announcement of a potential strategic crypto reserve, but analysts cautioned that the rally may be short-lived.
On March 2, Trump stated that his Working Group on Digital Assets had been directed to include three altcoins—XRP (XRP), Solana (SOL), and Cardano’s ADA (ADA)—in the US crypto reserve, as reported by Cointelegraph. The reserve will “obviously” also include Bitcoin (BTC) and Ether (ETH), Trump added in another post on Truth Social.
The announcement triggered a market-wide rebound, with the global crypto market cap rising nearly 7% to $3.04 trillion, while Bitcoin breached the $95,000 psychological mark after a 7.7% intraday rally.
Still, the rally may be temporary due to the lengthy approval process required to establish a US crypto reserve, according to Aurelie Barthere, principal research analyst at blockchain analytics firm Nansen:
“I think constituting a reserve by buying new tokens is a complex process that will need Congress’s vote, so it will take time. I would be a bit wary of the sustainability of today’s move.”
Some analysts expect an imminent market bottom after Bitcoin’s active addresses reached a near three-month high on Feb. 28, signaling that the market is at a “crucial turning point” that may signal a “capitulation moment,” according to crypto intelligence platform IntoTheBlock.
Analysts warn of short-term volatility
ADA, SOL, and XRP have outperformed the market on Trump’s announcement of their inclusion in the US strategic reserve.
Still, the crypto market’s upside may be limited and invite significant volatility in the short term, according to Nicolai Sondergaard, research analyst at Nansen.
The analyst told Cointelegraph:
“As Aurelie mentions it likely will not be that easy and I expect volatility in these tokens today especially (already seen in ADA nearly touching $1.17 and now sitting at $0.94).”
“Regardless of how long these gains will last, it is momentarily positive for the market, but the question for the future will be if any of it will come to fruition. If not, it will likely be a negative news point for crypto,” he added.
Still, crypto investors continue looking forward to other industry-specific developments as potential catalysts, including the first White House Crypto Summit, which is set to be hosted by Trump on March 7.
While there are no additional details about the summit’s agenda, stablecoin regulation and legislation related to a strategic crypto reserve have been at the forefront of regulatory discussions in the US.