Market Reaction: Bitcoin Plunges Amid Disappointment
Following U.S. President Donald Trump’s declaration of a strategic cryptocurrency reserve, which did not inspire investor enthusiasm because there were no plans for direct government purchases of Bitcoin, the price of Bitcoin fell by 6%.
The United States is now one of the few countries in the world with blockchain-based reserves after Trump signed an executive order on Friday creating a national stockpile of Bitcoin and other digital assets. But the project didn’t live up to the crypto community’s expectations, which caused the market to decline. Bitcoin dropped to a low of $84,900 before stabilizing around $84,483 as of 08:00 GMT.
Shift in Trump’s Crypto Stance
Despite his past skepticism—once calling Bitcoin a “scam”—Trump now seeks to make the U.S. the “Crypto Capital of the World.” The strategic reserve will consist of digital assets forfeited to the federal government through criminal and civil proceedings, according to White House AI and crypto advisor David Sacks. He clarified that the government will retain rather than liquidate these holdings, framing the reserve as a long-term asset.
Uncertainty Looms Over Crypto Reserve’s Implementation
Further clarity is expected during the first-ever White House crypto summit on Friday, where Trump is set to discuss the reserve’s potential implications. However, questions remain about the legality of the initiative and whether Congressional approval might be required.
Sacks likened the initiative to “a digital Fort Knox,” referencing the Kentucky facility that safeguards a significant portion of America’s gold reserves. The new stockpile will include various digital assets beyond Bitcoin, with an estimated federal crypto holding of approximately 200,000 BTC—worth around $17.5 billion at current market rates.
Skepticism Over Benefits to American Taxpayers
While the reserve’s purpose remains ambiguous, Sacks reassured that it “will not cost taxpayers a dime.” However, Trump’s decision not to allocate government funds for Bitcoin acquisition disappointed investors, contributing to the cryptocurrency’s price decline.
Comparisons to Traditional Strategic Reserves
To protect against economic volatility, governments around the world have strategic reserves of necessities. For instance, Canada has a national maple syrup reserve, while the United States has emergency petroleum supplies. It’s unclear if a comparable strategy for cryptocurrencies would pay out in the long run.
Speculation Surrounding Future Crypto Inclusions
Earlier this week, Trump hinted at five cryptocurrencies of interest for inclusion in the reserve: Bitcoin, Ethereum, XRP, Solana, and Cardano. Following his remarks, the market values of these digital assets briefly surged, reflecting continued investor speculation around the administration’s evolving stance on crypto policy.
