Bitcoin prices dropped by as much as 5.7 per cent on Friday following President Donald Trump’s signing of an executive order establishing a strategic Bitcoin reserve without committing to new purchases of the digital asset.
The largest cryptocurrency pared some of its losses to trade at $88,567 as of 7:10 a.m. in Nigeria, a 3.2 per cent decline for the day.
The order outlined plans to create a Bitcoin-specific reserve capitalized with assets already held by the federal government rather than acquiring additional Bitcoin through taxpayer funding.
Any future acquisitions would require “budget-neutral strategies” that impose no additional costs on American taxpayers, the order stated.
The market’s reaction was swift, with Bitcoin and other major tokens including Ether, XRP, Cardano, and Solana posting declines. Investors who had anticipated a new wave of government buying unwound their positions rapidly, driving prices lower.
Stefan von Haenisch, director of over-the-counter trading for Asia Pacific at Bitgo Inc., attributed the downturn to the absence of fresh purchases.
“Previously, investors were jumping into the market in anticipation of the government buying Bitcoin. With this latest development, these positions are being unwound,” he said.
Trump’s executive order also stipulated that Bitcoin deposited into the reserve would not be sold, contrasting sharply with the provisions for other digital assets.
The non-Bitcoin stockpile will only include assets obtained through forfeiture proceedings, and the Treasury has been granted discretion to sell these assets if deemed necessary.
As of now, the U.S. government holds approximately $16.4 billion worth of Bitcoin and $400 million in other digital assets, primarily seized through civil and criminal asset forfeitures.
The announcement comes ahead of a scheduled meeting between Trump and key executives from the crypto industry, including representatives from Coinbase Global Inc. and Robinhood Markets Inc.
The discussions are expected to center on the regulatory outlook for digital assets and the implications of the newly established Bitcoin reserve.
While the strategic reserve marks the first time Bitcoin has been formally recognized as a reserve asset by the U.S. government, analysts remain cautious about its impact on the market.
“The significance of this executive order is mainly symbolic,” said Andrew O’Neill, managing director of digital assets at S&P Global Ratings. “Without new purchases, the market’s expectations for a price boost have been severely tempered.”
The crypto market has been under pressure in recent weeks, hit by a combination of factors including a $1.5 billion hack, heightened regulatory scrutiny, and outflows from digital-asset exchange-traded funds (ETFs).
The announcement of the strategic reserve briefly sparked optimism, especially after Trump indicated that the reserve would also include Ethereum, XRP, Cardano, and Solana.
However, the lack of new buying interest quickly deflated the rally.
Meanwhile, the broader market remains wary of potential regulatory headwinds.
Trump’s previous criticism of the U.S. Securities and Exchange Commission (SEC) and his pledge to dismiss then-chair Gary Gensler had fueled expectations of a more crypto-friendly regulatory environment.
