TechFlow news, according to Cointelegraph, Professor Yu Xiong, Dean of the Institute for Blockchain and Metaverse Applications at the University of Surrey, conducted an in-depth analysis on including altcoins in state-backed cryptocurrency reserves, describing it as a "double-edged sword" with clear advantages and disadvantages.
Xiong pointed out that the main advantage of a multi-asset reserve lies in greater diversification, reducing overreliance on Bitcoin, which currently accounts for about half of the total cryptocurrency market capitalization. "Ethereum's DeFi ecosystem (with around $50 billion in total value locked) and Solana's high-speed transactions (65,000 TPS) represent technological diversity," he said. He added that incorporating altcoins also acknowledges broader blockchain use cases—for instance, Ukraine raised $135 million in crypto donations via ETH, SOL, and other tokens after Russia’s invasion in 2022.
However, Xiong highlighted several potential risks. First is regulatory uncertainty, such as the ongoing SEC lawsuit against Ripple, noting that "government ownership of these tokens could face opposition." Second is liquidity risk—lower trading volumes mean government buying or selling could cause sharp price spikes or crashes. Over the past 24 hours, Bitcoin had a trading volume of $54.8 billion, Ethereum $23.4 billion, XRP $5.5 billion, SOL $5.4 billion, and ADA $3.6 billion, suggesting certain altcoins may lack "the depth required for large-scale reserves."
Regarding concerns about market manipulation, Xiong stated: "The U.S. Treasury's sale of 30,000 Silk Road bitcoins in 2014 caused minimal market disruption, but today, selling 3% of the Bitcoin supply (approximately $5.5 billion) could lead to a 15% price drop."
On the potential impact of a U.S. cryptocurrency reserve, Xiong believes it would provide strong support for the crypto and blockchain industry, signaling increased institutional acceptance and accelerating adoption by traditional financial firms—similar to how BlackRock attracted $18 billion in AUM within six months of launching its Bitcoin ETF. He said, "A U.S. reserve could mirror the Strategic Petroleum Reserve’s role in energy security, positioning cryptocurrencies as a geopolitical tool."
Xiong also warned that the crypto market remains fragile, with Bitcoin’s 30-day annualized volatility fluctuating between 30% and 60% over the past year, compared to crude oil’s volatility below 35%. This higher volatility raises concerns about potential manipulation or unintended market distortions.
On the overall impact of a U.S. crypto reserve on the industry, Xiong summarized it as "short-term optimism, long-term caution," believing it could offer "cover" for institutional investors like pension funds. "If the U.S. government deems it appropriate, corporate treasuries and institutional investors may follow suit. Pension funds and insurers managing $50 trillion globally could increase their cryptocurrency allocations," Xiong said, likening it to the situation following the approval of Bitcoin ETFs in early 2024.
