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Strategic Bitcoin Reserve is Announced. Bitcoin Tanks. Why?
Wasn’t a strategic Bitcoin reserve going to send Bitcoin higher? In theory, yes. But there are a few things the market was expecting that Sacks’ announcement didn’t confirm...
Adam Atlantic
March 07, 2025 • Estimated Reading Time: 5 minutes
Yesterday evening, President Trump signed into law, via an Executive Order, the creation of a Strategic Bitcoin Reserve.
David Sacks posted the announcement on X.com. And here are the key points relating to Bitcoin,[1]
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.
The U.S. will not sell any Bitcoin deposited into the Reserve. It will be kept as a store of value. The Reserve is like a digital Fort Knox for the cryptocurrency often called ‘digital gold.’
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.
And finally, this,
IN ADDITION, the Executive Order establishes a U.S. Digital Asset Stockpile, consisting of digital assets other than Bitcoin forfeited in criminal or civil proceedings.
The government will not acquire additional assets for the Stockpile beyond those obtained through forfeiture proceedings.
The purpose of the Stockpile is responsible stewardship of the government’s digital assets under the Treasury Department.
Get What You Want, Market Sells Off
The market’s reaction?
Source: Coingecko
Wasn’t a strategic Bitcoin reserve going to send Bitcoin higher?
In theory, yes. But there are a few things the market was expecting that Sacks’ announcement didn’t confirm.
First off, let’s just get one thing straight. The U.S. government now has an active policy for a strategic Bitcoin reserve.
The initial holdings will be all the Bitcoin the government has previously seized from illegal and criminal activity (thank Ross Ulbricht, founder of Silk Road) for a lot of that.
As per the FBI Archives from 2013,[2]
‘Along with a prior seizure of approximately 29,655 Bitcoins, federal law enforcement agents have now seized a total of approximately 173,991 Bitcoins in connection with the Silk Road case, which, at today’s Bitcoin exchange rate, are worth over $33.6 million.’
Importantly it also means the government is now a diamond-handed hodler. They can’t sell any of it.
But, it’s the point where the Secretary of Treasury (Scott Bessent), and Secretary of Commerce (Howard Lutnick) can develop strategies for acquiring Bitcoin, where I think the market has overreacted.
Accelerating the BITCOIN Act
If you read the BITCOIN Act,[3] which was put forward by Senator Cynthia Lummis, it says under Sec. 5. (3) the government can add to the Strategic Reserve through the Bitcoin seizures, offsetting the need to purchase.
The key point is that long-term the U.S. government ends up with one million Bitcoin. Frankly, this executive order seems to put most of the BITCOIN Act into play, and thereby I still expect to see by 2030, the U.S. government hodling one million Bitcoin.
The fact they’ve already got 200,000 ready to go and can’t sell it is a great way to start.
The thing that was a little unexpected, was switching off the stockpile of digital assets to any acquisitions. In essence, they’ll keep all the crypto they acquire from seizures and forfeitures, but that’s it.
So, the idea of them loading up on DeFi crypto is a bit of a fizzler. However, it does then also suggest that crypto will form more of a part of what’s coming with the Sovereign Wealth Fund, rather than actual Treasury operations.
It looks like the government here is setting up clearly defined lanes.
Scott Bessent and the Treasury will take care of Bitcoin, and a Bitcoin reserve.
Howard Lutnick with the Sovereign Wealth Fund will take care of the integration of DeFi and TradFi.
Trust in crypto, Adam Atlantic