A strategic Bitcoin reserve in the United States reduces the possibility that the government will ever "ban" the cryptocurrency and could encourage many more nations to adopt Bitcoin, according to crypto observers.

This apparently disappointed traders, as it led to an immediate 6% fall in the price of Bitcoin.

The possibility of a strategic bitcoin (BTC) reserve in the United States is quickly reducing the possibility that the government will ever “ban” the cryptocurrency and could encourage many more nations to adopt bitcoin, according to crypto observers.

On March 7, US President Donald Trump signed an order establishing a Strategic Bitcoin Reserve and a digital asset stockpile. Capitalization of the reserve will come from bitcoin owned by the federal government that was forfeited as part of criminal or civil asset forfeiture proceedings, and is currently estimated at around 200,000 BTC, according to crypto czar David Sacks. However, traders were quickly disappointed as the news led to a 6% fall in the price of bitcoin.

But many say the markets may have it wrong and the news should be viewed as bullish.

President Trump signing SBR executive order. Source: David Sacks

Government less likely to ‘ban’ bitcoin

One of the impacts of a US strategic bitcoin (BTC) reserve is that it “dramatically reduces the likelihood the US government will someday ‘ban’ bitcoin,” Bitwise chief investment officer Matt Hougan told.

In November, the Federal Reserve Bank of Minneapolis suggested that bitcoin could one day force the federal government to balance its budget.

“A legal prohibition against bitcoin can restore unique implementation of permanent primary deficits, and so can a tax on bitcoin,” it said at the time.

Other nations could follow suit

The US bitcoin reserve also dramatically increases the chances that other nations will establish bitcoin reserves and accelerates the speed at which other nations will consider establishing them, as it creates a short window for them to “front-run” potential bitcoin buying by the US, Hougan added.

The US is the global leader in nation-state bitcoin holdings, with 207,189 BTC at current valuations of around $18 billion, according to BitBO. China is estimated to come in second with an estimated 194,000 BTC, and the United Kingdom is in third place, holding 61,000 Bitcoin.

El Salvador is the only country to have designated bitcoin as legal tender. It is still accumulating and currently holds 6,103 BTC, which is valued at around $534 million, according to the nation’s bitcoin office.

“I expect many of the G20 to take notice and eventually follow America’s leadership,” Coinbase CEO Brian Armstrong added.

Legitimizes bitcoin in the eyes of institutions

A US bitcoin strategic reserve also makes it much harder for institutions such as agencies like the International Monetary Fund to “position bitcoin as somehow dangerous or inappropriate to hold,” Hougan stated.

The IMF has been against sovereign nations, such as El Salvador, investing in bitcoin. On March 3, the IMF approved a funding program with El Salvador for $1.4 billion on the condition that it downgraded its bitcoin accumulation strategy. The memorandum of understanding indicated a condition of “no voluntary accumulation of BTC by the public sector in El Salvador.”

Bitwise head of research Ryan Rasmussen continued with the notion, saying that the end game was never “the US government buys all of the world’s bitcoin.”

He listed what the US SBR means: “Other countries will buy BTC, wealth managers have no excuse, financial institutions have no excuse, pensions and endowments have no excuse, fear of the US selling is gone, the US will likely buy more, likelihood of states buying just went up, and the probability the government outlaws Bitcoin is definitively zero.”

The co-founder and CEO at Lightpark, David Marcus, simply said, “This is a balanced outcome and the right decision for now,” adding he was “happy reason has prevailed.”

Bitcoin has come a long way

Meanwhile, crypto lawyer John Deaton points out that Treasury Secretary Scott Bessent and Secretary of Commerce Howard Lutnick “have been directed by the POTUS to find ‘budget neutral' ways to acquire BTC.”

It was only a year ago that regulators approved the first US spot bitcoin ETF, adds ETF Store President Nate Geraci.

Bitcoin is currently rebounding, having reached $88,000 at the time of writing.