As traders process Trump’s Strategic Bitcoin Reserve directive and a slew of U.S. trade tariffs, Bitcoin and Ethereum continue to lose ground.
As traders reevaluate the effects of trade tensions on global economic activity and President Donald Trump’s plan to create a Bitcoin Reserve, the cryptocurrency market keeps losing ground.
While Ethereum is down 8% and trading close above November 2023 values of about $2,000, Bitcoin has dropped 4.8% to $81,729 today. Out of the top ten cryptocurrencies, Dogecoin has lost the most, falling almost 13% to $0.16.
This is in spite of the fact that on Thursday, Trump signed an Executive Order that formally established the Strategic Bitcoin Reserve and permitted the establishment of a stockpile of digital assets.
According to a recent report from Singapore-based digital asset trading company QCP Capital, “the knee-jerk reaction lower probably stems from the realization that no actual budget has been allocated for Bitcoin purchases in the near term.
The order does, in fact, instruct the Secretaries of Treasury and Commerce to create “budget-neutral” plans for obtaining more Bitcoin, but it refrains from using public monies for ad hoc acquisitions.
According to David Lawant, head of research at FalconX, that seems to have annoyed investors.
Short-term predictions that the U.S. government will not be instantly committing to buy crypto assets in the open market caused Bitcoin to drop roughly 5% after the announcement before partially recovering the majority of the losses, he wrote Friday.
Nonetheless, the action is regarded by some industry analysts as a major turning point in the institutional acceptance of Bitcoin.
In contrast to the Digital Asset Stockpile, which consists of a variety of altcoins, including Ethereum, the executive order creates a Bitcoin Strategic Reserve.
Although it’s uncertain how much will be allotted in the end, Bitcoin confiscated through criminal and civil asset forfeitures is anticipated to be used as the reserve’s seed.
Arkham Intelligence estimates that nearly 198,000 Bitcoin (about $16.1 billion at today’s exchange rates) are in U.S. government wallets.
Nevertheless, if returned to previous owners, some of those holdings—which resulted from exchange hacks—might not be available for the reserve.
The presidential order establishes a Bitcoin Strategic Reserve, as opposed to the Digital Asset Stockpile, which is made up of several cryptocurrencies, such as Ethereum.
Bitcoin seized through criminal and civil asset forfeitures is expected to be used as the seed for the reserve, though the final amount is unclear.
According to Arkham Intelligence, there are around 198,000 Bitcoin in U.S. government wallets, which is equivalent to $16.1 billion at current exchange rates.
However, some of those holdings resulting from exchange hacks may not be available for the reserve if they are returned to their prior owners.
Whether Congress will act to formally establish a long-term Bitcoin acquisition plan is currently a crucial concern.
Legislation could establish Bitcoin holdings as a more permanent component of U.S. financial reserves, even though an executive order establishes policy.
Future conversations about legislative involvement are anticipated to be influenced by the March 11 Bitcoin for America event, which was organized by the Bitcoin Policy Institute and Senator Cynthia Lummis.
As they consider the wider effects of Trump’s trade tariffs, which have shook international markets and put pressure on risky assets like cryptocurrency, traders seem to be calling for more clarification on regulation until then.
FAQ
The prices of Bitcoin and Ethereum are dropping due to uncertainty surrounding President Trump’s Strategic Bitcoin Reserve directive and new U.S. trade tariffs. Investors are concerned about the lack of immediate government funding for Bitcoin purchases and the broader impact of trade tensions on the crypto market.
Trump’s Executive Order established a Strategic Bitcoin Reserve but did not allocate a budget for immediate purchases. This disappointed investors who expected direct government acquisitions, leading to short-term market declines.
Trade tariffs create economic uncertainty, affecting risk assets like cryptocurrencies. Investors are reassessing their positions as trade tensions impact global markets, causing volatility in Bitcoin and Ethereum prices.
The executive order instructs officials to develop “budget-neutral” plans, meaning no immediate purchases. However, Bitcoin seized from criminal and civil asset forfeitures may be used to seed the reserve, and future legislation could establish a formal acquisition strategy.
Yes, despite short-term price drops, many analysts view the establishment of a Strategic Bitcoin Reserve as a significant step toward institutional acceptance of Bitcoin. If Congress introduces legislation to support long-term Bitcoin holdings, it could benefit the market in the future.
