Imagine a savvy architect facing a dark old house, not rushing to fix the window frames, but swinging a sledgehammer, vowing to demolish the entire roof. The homeowner is panicked and finally compromises, agreeing to break open a skylight to let in the light. This is Donald Trump's specialty at the negotiating table - first proposing a startling extreme demand, then skillfully retreating to a moderate position to achieve his goal. This strategy inevitably reminds one of Lu Xun's "demolition effect": "The temperament of the Chinese people always likes to reconcile and compromise. For example, if you say the house is too dark and suggest opening a skylight here, they will certainly not allow it. But if you propose demolishing the roof, they will come to compromise and agree to open the skylight."
In psychology, this is called the "door-in-the-face" effect, and Trump is undoubtedly a master of this art. Last night, he proposed creating a national strategic reserve covering BTC, ETH, XRP, Solana (SOL) and Cardano (ADA), sparking heated discussion. As the revolving door of Trump Tower on Fifth Avenue in New York reflects the digital neon of the crypto world, this negotiation maestro, who is well-versed in the human game, is reenacting his classic script for the digital economy era.
Trump's "Demolition Effect" Track Record: From Extreme to Compromise
Trump's negotiation style is like a carefully choreographed drama, always opening with bold moves to set the stage. Here are two classic cases showing how he steps back from extreme positions to win key victories.
1. Trade Negotiations with China: High Tariffs to Gain Key Concessions
In 2018, Trump ignited the trade war with China. He imposed tariffs of up to 25% on $250 billion worth of Chinese goods, while issuing a stern warning: "China has taken advantage of the US for many years in trade, and I'm going to make them pay." This tough stance was like swinging a sledgehammer at the roof, putting the negotiating partner under unprecedented pressure. After multiple rounds of tug-of-war, in early 2020, the US and China signed the Phase One trade deal. Although the agreement was not perfect, Trump successfully secured some substantive results: China promised to purchase an additional $200 billion worth of US goods, including soybeans, energy and manufacturing products, over the next two years, and strengthen intellectual property protection measures. This "demolish the house, then open the skylight" tactic highlights his negotiation wisdom - from a high stance to gradual concessions, intimidating the opponent while leaving room for compromise.
2. Immigration Policy: From "Building a Wall" to Border Security
During the campaign, Trump put forward a bold, almost absurd proposal: to build a "great wall" on the US-Mexico border, and have Mexico pay for it. The cost estimate was as high as $25 billion, and the engineering difficulty and diplomatic complexity made the idea seem far-fetched. However, this was the opening act of the "demolition effect". Faced with domestic and international skepticism, Trump did not cling to the original plan, but shifted the focus to border security. Eventually, Congress gradually increased the border security budget from around $15 billion to $18 billion between 2017 and 2019, strengthening patrols and enforcement. Although the "great wall" never materialized, the "skylight" quietly opened - through an extreme proposal, he successfully drove a substantive policy adjustment.
These two cases reveal Trump's signature move: he is adept at using the "demolition effect" to reshape the "Overton window" of negotiation (the range of policies the public will accept), transforming seemingly fantastical proposals into practical realities.
The "Demolition Effect" in Crypto Practice
Now, Trump's gaze has turned to the digital economy. He proposed establishing a cryptocurrency strategic reserve including BTC, ETH, XRP, SOL and ADA, trying to seize the initiative in the global financial competition for the US. Strategic reserves are typically key resources held by nations, such as oil or gold, to address crises or stabilize markets. The idea of including multiple cryptocurrencies in the reserve is both bold and controversial, seen by many as another performance of the "demolition effect".
Crypto observer and Taproot Wizards founder Udi Wertheimer commented: "Trump is playing his old trick again - first proposing a ridiculous demand, then retreating to a baseline that everyone can accept." The "extremity" of this proposal is evident: it not only includes BTC, the recognized "digital gold", but also encompasses the controversial XRP (infamous for the SEC lawsuit), the high-risk SOL (which faced a trust crisis due to network outages), and ADA whose market position is not yet stable. In comparison, a reserve holding only BTC would seem more conservative and consensual. This "multi-coin reserve" idea, in the current regulatory environment, is as radical as "demolishing the roof" for Congress. But this may be Trump's calculation: using an "all-encompassing" plan as a pretext, ultimately making "a BTC-only reserve" the compromised "skylight".
As soon as the proposal was announced, social media X was set ablaze. Supporters hailed it as a milestone for crypto's mainstream adoption, believing it could boost America's competitiveness in digital assets. Critics, however, expressed deep concerns about regulatory loopholes and market manipulation risks that could undermine the idea. There is also division within Congress. Pro-crypto Senator Cynthia Lummis stated: "We need to explore the strategic value of digital assets." But more lawmakers are taking a cautious stance, with House Financial Services Committee Chair Patrick McHenry warning: "The regulatory framework for cryptocurrencies must be sorted out first, or the risks are too high." This disagreement precisely provides the stage for Trump's strategy - retreating from the fantastical proposal to a pragmatic plan may be able to garner enough support.
The Future of a BTC Strategic Reserve
Before looking at the future, let's first see where the current difficulties lie:
State-Level Legal Fragmentation
Currently, the regulatory attitudes and legislative progress of US states towards cryptocurrencies vary greatly, with many states yet to pass supportive laws. For example, New York's "BitLicense" system requires crypto companies to obtain a license, but the application process is cumbersome and costly, deterring many businesses. While states like California have a relatively open attitude towards cryptocurrencies, they lack unified standards. This fragmentation of state-level laws makes it extremely difficult to implement a nationwide BTC strategic reserve proposal. After all, if the states cannot coordinate consistently, the federal-level policy implementation will lack a solid foundation.
Legal and Regulatory Gaps at the Federal Level
At the federal level, the legal status of cryptocurrencies remains unclear. The Federal Reserve Act primarily covers traditional assets like gold and foreign exchange, but does not encompass digital assets like BTC. The SEC and CFTC still have disputes over the classification of cryptocurrencies - are they securities or commodities? This ambiguity directly hinders the advancement of the strategic reserve proposal. Furthermore, Congress has not passed any legislation directly supporting cryptocurrencies as a national reserve asset. For example, the "Digital Asset Market Structure and Investor Protection Act" proposed in 2021, which aimed to provide a regulatory framework for cryptocurrencies, ultimately failed to pass, reflecting the slow and complex legislative process.
Partisan Divisions and Political Resistance
The proposal faces serious partisan divisions in Congress. The Democratic Party tends to strengthen the regulation of cryptocurrencies, with Senator Elizabeth Warren publicly criticizing them as a "ticking time bomb in the financial system" and concerned that they may facilitate money laundering and speculation. While there are supporters within the Republican Party, such as Senator Ted Cruz who believes Bit can be used as an anti-inflation tool, the overall attitude is not unified. Although Trump has influence within the Republican Party, pushing a bill through both the Senate and the House of Representatives still requires bridging the partisan divide, which undoubtedly increases the difficulty of the proposal.
Reasonable assumptions, three possible scenarios for the future of Bit strategic reserves
1: Comprehensive breakthrough (probability 25%)
By 2025, enact the "Digital Reserve Emergency Act" to establish an initial reserve including Bit and ETH. The U.S. Treasury Department issues digital bonds that allow subscription with crypto assets. This scenario requires the Republican Party to sweep both the Senate and the House of Representatives, and a shift in the Federal Reserve's attitude.
2: Compromise solution (probability 55%)
By 2026, establish a single Bit reserve, with a scale controlled between 200-500 billion U.S. dollars (equivalent to 5%-10% of the U.S. gold reserve). Solve the custody issue through the "Cryptocurrency Banking Charter", but exclude other tokens. This follows Trump's classic path of "dismantling the roof first, then opening the skylight".
3: Institutional backlash (probability 20%)
The SEC defines most tokens as securities through the "Howey test", triggering constitutional litigation. The fragmentation of state-level regulations intensifies, ultimately leading to the demise of the proposal. In this scenario, the U.S. may miss the opportunity to seize the high ground of digital finance, repeating the 5G race debacle.
Regardless of the outcome, the core of Trump's strategy is to seize the initiative. He may not really expect XRP or ADA to be included in the reserve, but rather to pave the way for locking in Bit as the core target through the "dismantling" momentum.
Epilogue: The Digital Senate of the New Rome
As Trump's crypto reserve proposal faces a wave of skepticism on Capitol Hill, we see not only a policy debate, but a deeper struggle over the forms of civilization. Blockchain technology is reshaping the millennium equation of "state-currency-power", and the choice of strategic reserves is essentially writing the source code of digital civilization.
As Machiavelli revealed in "On Livy", the true power lies not in possessing gold, but in defining the standard of gold. In the ultimate interpretation of the "dismantling effect", Trump is trying to seize the power to set the value standard of the digital era for the United States. Regardless of the outcome, this crypto reserve battle has revealed that the future currency war will be decided on the distributed ledger of the Blockchain.
