Reported with insights from the Financial Times
The cryptocurrency market took a hit on Friday after President Donald Trump signed an executive order to establish a US strategic bitcoin reserve. Investors had hoped for a large-scale government purchase of digital assets, but the plan turned out to be far less ambitious. Instead, the reserve will only hold cryptocurrencies seized by US law enforcement, leading to a wave of disappointment among traders.
Bitcoin Drops as Hopes Fade
Bitcoin fell 2.7% to around $88,000 following the announcement. Ethereum, the second-largest cryptocurrency, lost 3.1% to trade at approximately $2,190. Other tokens, including Cardano’s ADA, Solana, and XRP, also saw significant declines.
The drop came after Trump’s earlier social media post on Sunday, which had sparked speculation that the government might start actively buying cryptocurrencies. His mention of a potential reserve—including Ethereum, Cardano, Solana, and XRP—had fueled a short-lived rally in the market. However, the actual plan turned out to be much more limited, leading to a sell-off.
A Symbolic Reserve, Not a Game-Changer
The concept of a reserve asset is not new. The US maintains an emergency oil reserve to protect against supply shocks, and many countries hold gold reserves. A strategic bitcoin reserve, if substantial, could have positioned crypto as a legitimate alternative to traditional financial assets.
However, the government clarified that it would not actively acquire additional cryptocurrencies. The reserve would only consist of assets obtained through legal seizures, with potential sales being considered. This means the US is not actively investing in crypto—it’s simply holding onto confiscated assets.
David Sacks, a billionaire investor and the White House’s crypto policy lead, described the reserve as a “digital Fort Knox.” He estimated that the US currently holds around 200,000 bitcoins worth approximately $17.8 billion. Additionally, blockchain data suggests the government controls $123 million worth of Ethereum, $122 million in Tether, and several other tokens valued at a collective $114 million.
But without a clear acquisition plan or timeline, the move remains largely symbolic. Andrew O’Neill, managing director of digital assets at S&P Global Ratings, stated that this initiative does not indicate any major shift in US policy toward actively adopting crypto.
Why the Market Reacted Negatively
Investor sentiment turned bearish for two key reasons. First, the lack of government purchases meant there would be no immediate increase in demand for Bitcoin or other cryptocurrencies. Second, the possibility of asset sales introduced uncertainty, as liquidating seized tokens could put downward pressure on prices.
The broader crypto market has been struggling with regulatory uncertainty, and this news added to the uncertainty rather than clearing it up. While some crypto supporters see government recognition of digital assets as a step forward, the lack of a concrete strategy makes it difficult to assess the long-term impact.
Washington’s Evolving Stance on Crypto
Despite the disappointment, the US government’s approach to crypto is shifting. The White House hosted a summit on Friday with major industry players, including Coinbase CEO Brian Armstrong and MicroStrategy’s Michael Saylor. This signals increasing engagement with the sector, even if the government remains cautious about direct involvement.
Meanwhile, US authorities continue to crack down on illicit crypto activities. On the same day as the summit, the Secret Service seized website domains linked to Russian cryptocurrency exchange Garantex and confiscated more than $26 million worth of transactions.
A Missed Opportunity?
Trump’s bitcoin reserve plan could have been a game-changer if it involved active government purchases, but the limited scope of the initiative left the market underwhelmed. Instead of a bold move into crypto, the US is simply holding onto seized assets—hardly the vote of confidence investors were hoping for.
While Washington’s engagement with crypto is increasing, this executive order does little to change the current market landscape. For now, traders will continue looking elsewhere for the next major catalyst in the crypto space.
