BTC Drops as U.S. Strategic Bitcoin Reserve Disappoints Traders

Bitcoin dropped sharply after President Donald Trump’s Strategic Bitcoin Reserve disappointed traders, who were unhappy that the reserve would only contain seized Bitcoin, with no intention of funding new purchases.

The U.S. government has almost 200,000 BTC, worth $17.7 billion. But about half of these, almost 95,000, came from the Bitfinex hack and will have to be returned to victims or paid for.

White House AI and Crypto Czar David Sacks revealed on X that “the Reserve will be capitalized with Bitcoin owned by the federal government that was forfeited as part of criminal or civil asset forfeiture proceedings. This means it will not cost taxpayers a dime.”

A White House press release emphasized the same thing, adding that a full accounting of all government agencies’ cryptocurrency holdings has been ordered.

Disappointment or Overreaction?

Crypto traders were widely expecting the President to establish a Bitcoin reserve that would buy BTC.

“For what it’s worth, this is not the ‘reserve’ that crypto bulls had in mind. A clear sell the news event with expectations not being met.” The Kobeissi Letter explained on X.

"BTC is primarily dropping due to the markets overall sentiment and disappointment with the strategic BTC reserve being established with existing government holdings, rather than new purchases that would have greatly increased demand," said Arjun Aurora, COO of Orderly Network, in an email. "With no immediate plans for acquiring BTC and overall market sentiment and sensitivity, BTC will continue to follow US stocks’ performance as it’s been doing in the past.”

Although Bitcoin made up the ground it lost on the initial shock of the reserve’s contents within a few hours, it has been trending lower since, currently changing hands at around $82,000.

Some felt the reaction was overdone.

“Bitcoin always overreacts on news, both up and down,” said Capriole Investments fund founder Charles Edwards on X. “Market positioning once again got excessively short on today's [Executive Order] announcement.”

Coinbase Director Conor Grogan said on X that the reserve “removes ~$18 billion of sell-side pressure.” While that doesn’t account for the possibility that only half of the stockpile can be held, it’s still about $9 billion in sell-side pressure removed. And the other half will likely be returned to victims rather than sold.

Others expected a bull move once the news sinks in.

“The landscape is primed for a Bitcoin breakthrough,” Rena Shah, COO of Trust Machines, told The Defiant in an email. “The movement of developers building on Bitcoin, institutional adoption of assets like sBTC, and increased demand for Bitcoin DeFi applications — Bitcoin is the place to be this year.”

Profound Implications

The official White House statement on the Bitcoin Reserve refers to Bitcoin as “digital gold” and adds that it is “because of its scarcity and security, having never been hacked.”

Sacks added that the Reserve is like a digital Fort Knox for the cryptocurrency.

While the White House is clearly bullish on Bitcoin and crypto in general, it’s not about to go on a buying spree, he said.

“The Secretaries of Treasury and Commerce are authorized to develop budget-neutral strategies for acquiring additional Bitcoin, provided that those strategies have no incremental costs on American taxpayers,” said Sacks. “The government will not acquire additional assets for the Stockpile beyond those obtained through forfeiture proceedings.”

Treasury Secretary Scott Bessent was more optimistic on CNBC. “The first step is to stop selling, and then we’re going to put a plan in place from there,” he said. “After the victims are paid, and all of that, any seized assets will go into this reserve, and then we'll see what the way forward is for more acquisitions, for the reserves. We're starting with Bitcoin, but it's an overall crypto reserve.”

Bitwise head of research Ryan Rasmussen said on X that “the end game was never ‘the U.S. government buys all of the world’s bitcoin.’ This changes everything. Zoom out.”

Bitwise CIO Matt Hougan added that a U.S. strategic Bitcoin reserve will make it far more difficult for institutions ranging from investment advisors to international bodies like the International Monetary Fund (IMF) “to position bitcoin as somehow dangerous or inappropriate to hold.”

The IMF is currently trying to force El Salvador’s President, Nayib Bukele, to stop acquiring Bitcoin for the country in order to secure a $1.4 billion loan.