Let me paint you a picture. Imagine the U.S. Treasury announced it was buying up Amazon stock, Swiss francs, and commodities to hold as strategic reserves. Markets would go haywire. Now, replace those assets with Bitcoin, Ethereum, and a handful of other cryptocurrencies. That’s exactly what’s happening. President Trump just declared he’ll sign an executive order to create a U.S. sovereign cryptocurrency reserve, naming Bitcoin (BTC), Ethereum (ETH), Solana (SOL), Cardano (ADA), and Ripple (XRP) as its pillars.
This isn’t just a political stunt—it’s a seismic shift. The US is no longer dismissing crypto; it is hoarding it. And when the US or other big governments hoard (like China for gold), markets bend. However, while the U.S. leans into crypto as a strategic asset, Europe is sprinting in the opposite direction. The EU’s Markets in Crypto-Assets (MiCA) regulations, set to fully roll out in 2025, are a labyrinth of compliance rules designed to “protect investors” but risk strangling innovation. Brussels is treating crypto like a dangerous toy, while Washington is treating it like a weapon. Let me walk you through what this means and why Europe’s approach could backfire spectacularly.
Layer 1 Winners and Losers
Layer 1 blockchains are the foundation of crypto—the main streets where transactions live. The U.S. government just lit a flare over five of them: BTC, ETH, SOL, ADA, and XRP. Bitcoin, the “digital gold,” will thrive. Its 21 million supply cap and global brand make it the obvious choice for a reserve asset. Ethereum, meanwhile, is the backbone of decentralized finance (DeFi). If the U.S. wants to modernize finance, ETH isn’t optional—it’s infrastructure. Solana and Cardano? They’re the efficient, compliant newcomers that governments love. XRP, with its legal clarity and bank-friendly design, rounds out the list. But what about the rest? Chains like Algorand or Stellar—technically brilliant but politically invisible—will struggle. Litecoin, despite its loyalists, feels redundant next to Bitcoin. Here’s the kicker: other countries won’t sit still. Just as the U.S. embraces SOL or ADA, nations in Asia or the Middle East might rally behind chains like Binance Smart Chain (BSC). BSC is already a powerhouse in Asia, offering cheap transactions and deep ties to Binance, the world’s largest crypto exchange. If the U.S. reserve sparks a global blockchain arms race, BSC could become Asia’s answer to America’s picks. Meanwhile, Europe is fumbling. MiCA’s compliance costs are so steep that startups like France’s Sorare (an NFT platform) are relocating to friendlier jurisdictions. The EU’s rigid rules prioritize stability over innovation, leaving European Layer 1 projects like Polkadot (headquartered in Switzerland) in regulatory purgatory. While the U.S. and Asia build, Europe is building paperwork.
Layer 2 and 3 Winners and Losers
Layer 2 and 3 networks are like specialized tools built on top of Layer 1s. They’re not the main event, but they make the main event better. The winners here will be those tethered to the U.S.-backed Layer 1s. Take Arbitrum and Optimism—Ethereum’s trusty sidekicks. They’ll boom as ETH adoption grows. The Lightning Network, Bitcoin’s payment layer, could finally go mainstream, turning BTC into a currency you use, not just hoard. The losers? Projects like Skale or Raiden, which don’t have a VIP pass to the Layer 1 party. Even Layer 3 projects—those hyper-niche chains for gaming or NFTs—will fade unless they’re piggybacking on ETH or SOL. Without a connection to the “chosen” chains, they’re digital ghost towns. Europe’s regulatory overreach amplifies this divide. Take StarkWare, an Israeli-EU Layer 2 project. Despite its cutting-edge zero-knowledge proofs, StarkWare faces MiCA’s compliance gauntlet, which could slow its adoption across the Eurozone. Compare that to Polygon, an Ethereum Layer 2 with strong U.S. ties, which is poised to benefit from America’s pro-crypto stance. Europe isn’t just losing the Layer 1 race—it’s sabotaging its Layer 2 future.
Utility Projects Are The Quiet Champions
Let’s be clear: the U.S. isn’t stockpiling crypto just to flex. They’re betting on blockchain’s utility. That’s why projects solving real problems will dominate. Chainlink, which feeds real-world data (like weather or stock prices) to blockchains, could become as critical as the internet itself. Filecoin, offering decentralized storage, is a hedge against data monopolies. DeFi lending platforms, potentially with official bank endorsements, might redefine transactions and banking services for millions. As I wrote in VALUE INVESTING ON CRYPTO BLOCKCHAIN PROJECTS, “The best crypto projects don’t need hype. They need users.” Utility is the ultimate moat. But Europe’s regulatory obsession could stifle even these champions. Consider MakerDAO, a decentralized stablecoin project founded by a Dane. Under MiCA, its governance token, MKR, faces classification as a “security,” subjecting it to onerous reporting rules. Meanwhile, U.S.-based projects like Circle (issuer of USDC) are thriving under clearer guidelines. Europe is regulating utility into exile.
Memecoins
Let’s talk about the elephant in the room: memecoins. The U.S. government’s move is a death knell for 99% of them. Tokens like Fartcoin or Dogwifhat—built on jokes and zero utility—will evaporate under regulatory heat. But there’s a twist: established memecoins like Dogecoin or Shiba Inu might linger. Why? They’ve achieved something rare: cultural relevance. Dogecoin is accepted by Tesla; Shiba Inu has a massive, vocal community. They’re the “blue-chip memes.” But don’t confuse survival with success. As I argued in “FARTCOIN IS THE LATEST PROOF OF HOW DIAMETRICALLY WRONG CENTRAL BANKS POLICIES ARE”: “Memecoins are the symptom of a speculative fever. When the fever breaks, only the strongest viruses remain.” Doge and Shiba might hang on, but they’ll never be serious investments. In Europe, even these survivors face existential threats. MiCA’s strict marketing rules could ban memecoin promotions outright. Germany’s BaFin, for example, recently fined a crypto exchange for listing “unregistered speculative tokens”—a category that could include Dogecoin. Europe isn’t just killing the clowns; it’s boarding up the circus.
Principles to Follow In The Future
If you’re wondering how to navigate this new world, I’ll leave you with three principles from my earlier work:
- Bet on infrastructure, not jokes. MicroStrategy’s relentless Bitcoin buys (WHAT IF MICROSTRATEGY BECOMES TOO BIG TO FAIL?) show where a lot of institutional money’s going.
- Follow the geopolitical tides. The U.S. isn’t the only player. As I noted in “IS THIS BLACKROCK’S MASTER PLAN FOR BITCOIN?“, “When giants move, the earth shakes.” Watch how Asia responds with chains like BSC, while Europe ties itself in red tape.
- Ignore the noise, and focus on value as I extensively discussed in *A CRYPTO UPDATE TO BEN GRAHAM’S “THE INTELLIGENT INVESTOR” and VALUE INVESTING ON CRYPTO BLOCKCHAIN PROJECTS already in 2023
Conclusion
President Trump’s crypto reserve plan isn’t just about politics—it’s a declaration that blockchain is here to stay. The winners will be chains with sovereign backing, projects that solve problems, and investors who see through the memecoin fog. Europe, which as usual is playing checkers and not chess, is writing its own obituary. By treating crypto as a threat rather than an opportunity, the EU is ceding the future to the U.S. and Asia. While Frankfurt debates transaction reporting rules, Miami is building a blockchain hub. While Paris fines meme traders, Singapore integrates crypto into its financial system. As I wrote in “WHY A BITCOIN ETF WILL REMOVE THE BARRIER BETWEEN CENTRAL BANKS’ MONEY PRINTING AND CRYPTO”, institutional adoption changed everything and now that we are shifting to major government adoption, the changes in the global economic ecosystem just geared up. The rules have changed. Adapt or get left behind.
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