Comment It’s now official: President Donald Trump has signed an executive order on Thursday establishing a US Bitcoin reserve along with a stockpile of related digital assets. However, rather than enhancing the coins’ value, the market responded unfavorably to this announcement.
Bitcoin, Ethereum, and other cryptocurrencies experienced a decline, although they partially recovered as the public processed the news. It’s important to note that the overall markets in the United States are currently down, largely due to the White House’s inconsistent stance on import tariffs against neighboring and allied countries. Consequently, the decline in cryptocurrency values isn’t solely a reaction to the President’s strategy regarding Uncle Sam’s digital asset holdings.
The essence of Trump’s executive order is this: The Treasury Department is instructed to create two funds, a Strategic Bitcoin Reserve and a Digital Asset Stockpile. These will be filled with cryptocurrencies that the federal government has already seized through criminal or civil asset forfeiture, or as part of monetary penalties, with the stockpile comprising anything except Bitcoin.
Federal agencies that currently hold BTC and other cryptocurrencies have a deadline of 30 days to transfer these assets to the Treasury. The Treasury is then required to place its entire crypto holdings into either the reserve or the stockpile, unless officials have a temporary reason to retain them for crime victim restitution, debt settlement, or service payments. Interestingly, reports indicate that the US Marshals Service has lost track of the exact amount of cryptocurrency in its possession—with the service responsible for managing seized assets—complicating this undertaking if true.
The Bitcoin included in the reserve “shall not be sold and shall be maintained as reserve assets of the United States,” as stated in the President’s order. Although the same stipulation does not apply to the stockpile, it means that all Bitcoin designated for the reserve is effectively removed from the market, which could potentially drive the price of Bitcoin up as its supply decreases. However, these coins will not be utilized in transactions and commerce.
“From a broader economic perspective, if the assets are locked in a digital vault, they simply remain dormant, and their appreciation in value becomes insignificant,” said Martha Bennett, Forrester VP principal analyst specializing in blockchain, web3, and digital assets, in a phone interview with The Register.
If the assets are locked in a digital vault, they simply remain dormant, and their appreciation in value becomes insignificant.
According to the White House’s crypto and AI advisor David Sacks, the US government possesses approximately 200,000 BTC through forfeitures, with an estimated value of around $18 billion at the time of writing. The extent of other cryptocurrencies earmarked for the stockpile is uncertain, but Bennett noted that most forfeitures have historically involved Bitcoin.
When questioned whether Trump’s order positions the United States as a Bitcoin bagholder, possessing a substantial amount of assets that could be liquidated or exchanged for other tokens but won’t be, Bennett conceded that it’s a plausible situation.
“When viewed objectively, that rationale is quite compelling,” Bennett reflected.
Crypto skeptic Molly White shared her thoughts via email, indicating that the executive order makes it evident that any practical arguments for establishing a Bitcoin reserve have been undermined by the order itself.
“They have yet to provide a clear justification for how such a reserve would benefit the nation,” White stated. “Claims by certain politicians (e.g., Lummis, suggesting it could be utilized to offset national debt if Bitcoin appreciates) have been directly contradicted by the declaration in the executive order that the US won’t be selling the tokens.”
Strike one for a jubilant crypto industry.
No purchases, no market enhancement
Another significant point of contention within Trump’s proclamation—likely a factor in the crypto community’s disappointment—is that the order permits the reserve and stockpile to grow only in two scenarios: either through the acquisition of more forfeited assets or, in the case of the reserve, via Bitcoin purchases that are “budget neutral and do not impose additional costs on US taxpayers.”
The order makes no exception for acquiring non-Bitcoin cryptocurrencies.
According to White, much of the discontent among cryptocurrency enthusiasts following the announcement stems from the realization that Trump won’t be “propping up their portfolios by acquiring a substantial amount of crypto,” a sentiment that Bennett concurs with. Keep in mind, this is the same President who promoted meme coins tied to himself and his wife when returning to power in January.
“Many were quite excited by the potential for the Trump administration to create something resembling what RFK Jr. described—a ‘strategic reserve’ formed by purchasing large quantities of Bitcoin,” White mentioned, referring to newly appointed Health Secretary Robert F. Kennedy Jr.
“While there is still some opportunity for new acquisitions, [it remains] unclear, and the ‘budget neutrality’ conditions certainly do not make substantial purchases look particularly likely.”
Bennett echoed this sentiment, noting that the crypto community had anticipated that the stockpile would involve procuring vast amounts of cryptocurrencies, thereby elevating prices. This action would not only satisfy those seeking price appreciation but also cater to the expectations of speculators.
“There exists a whole speculative industry surrounding cryptocurrency,” Bennett explained, referring to the futures and other investments people have made on Bitcoin and other currencies. Bennett pointed out, “those bets are not going to materialize since there’s no purchasing activity occurring.”
Regarding how a “budget neutral” Bitcoin acquisition could be realized, Bennett speculated that it could only happen if there’s a surplus at the Federal Reserve available to be transferred back to the Treasury every year.
“Currently, the Fed does not return any funds to the Treasury, so [that route is] hypothetical,” Bennett observed.
Strike two for crypto optimists, therefore.
Moreover, White pointed out that cryptocurrency investors and traders are concerned the executive order will give the government more impetus to tighten regulations against them.
“Some individuals are (reasonably) suggesting this creates a skewed motivation for the government to seize more Bitcoin and crypto assets for their own benefit,” White remarked.
“They have attempted to address the concerns from the non-crypto community that the administration is merely confiscating citizens’ assets to funnel into crypto holders’ accounts. However, the order’s lack of clarity regarding the specifics of the reserve has fostered that perception regardless,” she added.
And there’s your third strike.
As of now, BTC has dropped nearly three percent within the past 24 hours, falling over seven percent in the last five days, and ten percent for the month. Conversely, it’s risen over 60 percent in the past six months and 30 percent this year. ®
