Despite Trump's executive order establishing a Bitcoin reserve using seized funds, the price dropped initially, fueled by "sell the news" sentiment and uncertainty over the long-term implications and legal complexities.
This morning, the long-awaited executive order for Bitcoin strategic reserves in the crypto industry has finally been implemented. At around 8 a.m. on March 7, White House AI and cryptocurrency director David Sacks posted a message saying that President Trump had just signed the executive order. Surprisingly, the price of Bitcoin fell instead of rising, dived from around $90,000 to below $85,000 within one hour, and only rebounded to around $88,000 as of the time of writing.
The strategic reserve is capitalized by Bitcoin confiscated by the federal government. The US government has made it clear that it will not sell the Bitcoin in the reserve and is likely to not purchase additional purchases, emphasizing that "no taxpayers' penny is spent." In January, Trump directed to assess the possibility of building digital asset reserves and formed a working group with David Sacks as chairman. Marcus, an analyst at 10x Research, pointed out that the term "reserve" originally implies active acquisition of assets, but "establishment and maintenance" indicates a passive strategy of "stopping but not buying", which means that the government tends to hold existing cryptocurrencies rather than new purchases, which is biased from the market's expected active purchase strategy.
In addition, Trump's executive order for Bitcoin strategic reserves is far from being approved by Congress, and it will take several months before it is officially approved and take effect. This uncertainty has caused traders to have Sell The News sentiment and choose to sell. After all, the US government's handling of currency, reserves and financial assets is subject to strict laws and relevant institutions. As a decentralized digital currency, reserves require a series of complex, safe and reliable formal processes, which has also caused many concerns in terms of funding and security.
However, many practitioners who have close ties to this pro-crypto government have a positive attitude towards the executive order. David Sacks said that the U.S. government’s premature sale of Bitcoin caused taxpayers to lose more than $17 billion, and now it will develop strategies to increase the value of Bitcoin held. Coinbase director Conor Grogan also posted a statement saying that it is estimated that the U.S. government holds 198,109 bitcoins, and the executive order can reduce the selling pressure of about $18 billion.
It is worth noting that in addition to federal government actions, many states in the United States are also responding actively. So far, 18 states have considered or proposed legislation to establish state-level strategic Bitcoin reserves. On February 27, the Texas Business and Commerce Commission took the lead in reviewing and passing the Bitcoin Reserves Act and submitted it to the Senate for consideration. The bill aims to establish state-controlled Bitcoin reserves, strengthen financial security and promote digital asset innovation, covering authorizing the Texas government to hold Bitcoin, manage it by the Auditor General's Office, implementing cold storage solutions and regularly auditing, and prohibiting the acquisition of Bitcoin from specific illegal entities.
On March 7, the Texas Senate passed the Strategic Bitcoin Reserves Act SB-21 with 25 votes in favor and 5 votes against. After that, the bill will need to be submitted to the Texas House of Representatives, which will go through the committee review, revision, hearing and other processes. If the Senate does not agree after the House of Representatives amendment, it will also need to coordinate the final version through the conference committee, and finally it will be submitted to the governor for signature after being voted separately by the two houses.
At present, the US government holds about 200,000 Bitcoins worth about 18 billion US dollars, mainly due to the seizure of law enforcement operations such as the Silk Road case and the 2016 Bitfinex platform hacking case. With the signing of the executive order for Bitcoin Strategic Reserves, "Does Bitfinex's Bitcoin be returned?" has become the focus of industry attention, because it accounts for nearly 50% of the government's Bitcoin holdings.
After the hacking in 2016, Bitfinex reduced its customer balance by 36% and issued BFX (LEO) tokens, which were all redeemed. The government believes that the customer is "complete" and regards Bitfinex as the main claimant. In October 2024, the U.S. Attorney’s Office hinted that Bitfinex might be the only victim eligible for compensation, and in January 2025 proposed to return Bitcoin to Bitfinex “in physical”.
Previously, Bitfinex promised to buy back LEO if it gets back Bitcoin. Many former customers believe that they have the right to receive appreciated Bitcoin, so after the relevant news came out in October 2024, the LEO tokens quickly rose by nearly 40%. Now that the executive order is signed, the U.S. government's position may change.
David Sacks also mentioned in his tweet that the executive order established the "U.S. Digital Asset Reserve" to manage government digital assets under the leadership of the Treasury Department. The upcoming White House Encryption Summit is his key task at the moment. The summit is highly spectacular and highly anticipated "National Crypto Strategic Reserve" plans to include mainstream cryptocurrencies such as Bitcoin and Ethereum into the national reserve system, with functions similar to traditional oil reserves.
Forbes disclosed that the selection of reserve assets takes into account the characteristics of each currency. In terms of regulatory system construction, the summit will focus on discussing stablecoins and the overall regulatory framework. Trump's adviser advocates strengthening the hegemony of the US dollar through stablecoins may affect the federal regulatory plan. The draft bill promoted by the House Financial Services Committee shows that stablecoin institutions with an issuance of over 10 billion US dollars may be included in the Federal Reserve's supervision to form a two-tier regulatory framework. The relevant bills proposed in 2023 may also usher in substantial progress.
To achieve the goal of "Crypto Capital", the summit may introduce innovative incentives and tax policies, relax regulatory restrictions, and may even discuss crypto tax reforms, affecting investors' tax burden and promoting industry growth. However, this series of future plans are still full of uncertainty at present, and may be one of the potential factors for the diving of Bitcoin prices. The market is waiting for clearer and more immediate positive results to be implemented.
