In an impactful move that sent ripples through the cryptocurrency world, former US President Donald Trump introduced an executive order on March 7, which saw the creation of the Strategic Bitcoin Reserve (SBR) as well as a “Digital Asset Stockpile”. Both of these initiatives are to be initially funded with cryptocurrencies confiscated through government-initiated criminal and civil forfeiture operations. This move, however, led to a swift reaction in the market, with the price of Bitcoin (BTC) dropping roughly 7% from $91,200 to $84,667. This instantaneous drop was perceived by many observers as a conventional “sell the news” moment. On the other hand, experts argue that the market may have misconstrued the long-term effects of this action.
Perception of the Strategic Bitcoin Reserve (SBR)
David Sacks, who held the position of the White House AI and crypto czar during the Trump administration, announced, “A few minutes ago, President Trump signed an Executive Order to establish an SBR. The Reserve will be funded with Bitcoin owned by the federal government that was forfeited as part of criminal or civil asset forfeiture proceedings, meaning it will not impose any financial burden on taxpayers.”
Sacks unveiled that the US government is in possession of roughly 200,000 Bitcoin. However, he also highlighted that “there has not been a comprehensive audit” and that “the Executive Order mandates a full accounting of the federal government’s digital asset holdings.” It was made clear by President Trump that “any Bitcoin deposited into the Reserve will not be sold. It will be preserved as a store of value. The Reserve will act as a digital Fort Knox for the cryptocurrency, which is often referred to as ‘digital gold.’”
Furthermore, Howard Lutnick, the then Secretary of Treasury and a renowned Bitcoin advocate, was authorized to develop budget-neutral strategies for acquiring more Bitcoin. Although the specific methods for this remain undisclosed, it suggests the US government might further accumulate BTC. Sacks added, “The Secretaries of Treasury and Commerce can develop strategies for acquiring additional Bitcoin, provided that these strategies do not impose any additional costs on American taxpayers.”
A Glance at the US Digital Asset Stockpile
Besides the SBR, the executive order also led to the establishment of a US Digital Asset Stockpile. This stockpile comprises seized digital assets other than Bitcoin. Sacks stated that this stockpile would not actively expand beyond what the government obtains through forfeiture, stressing its purpose as ensuring “responsible stewardship of the government’s digital assets under the supervision of the Treasury Department”.
Amid the price volatility, key industry figures like David Bailey, CEO of BTC Inc, and Nic Carter, general partner at Castle Island Ventures, expressed optimism. Bailey, in particular, was notably excited, stating, “This is the shot heard around the world. Could not be more proud of this moment or more excited for what comes next. See you on the moon.”
Strategic Impact of the Executive Order
Matt Hougan, Chief Investment Officer (CIO) of Bitwise, underlined four reasons why this executive order has a significant bullish impact on Bitcoin:
1) It dramatically reduces the probability of the US government prohibiting Bitcoin;
2) It significantly increases the likelihood that other nations will establish strategic Bitcoin reserves;
3) It accelerates the pace at which other countries will contemplate establishing strategic Bitcoin reserves, as it provides a short-term opportunity for nations to get ahead of potential additional buying by the US;
4) It makes it more challenging for institutions — from national account advisor platforms to quasi-governmental agencies like the IMF — to portray Bitcoin as a dangerous or inappropriate asset to hold.
MacroScope17, a well-known crypto analyst, commented on the expectation of a “nation-state arms race psychology” and also the likelihood of seeing more 13F filings by sovereign wealth funds who were awaiting this announcement.
At the time of publication, Bitcoin was trading at $88,104.
How does the Strategic Bitcoin Reserve work?
The Strategic Bitcoin Reserve has been set up through an Executive Order signed by President Trump. It will be funded by Bitcoin that is owned by the federal government and was forfeited as part of criminal or civil asset forfeiture proceedings. This means the Reserve does not impose any financial costs on taxpayers.
What is the purpose of the US Digital Asset Stockpile?
The US Digital Asset Stockpile, established along with the Strategic Bitcoin Reserve, comprises seized digital assets excluding Bitcoin. Its main purpose is to ensure responsible stewardship of the government’s digital assets under the supervision of the Treasury Department.
What is the anticipated impact of the set up of the Strategic Bitcoin Reserve?
The establishment of the Strategic Bitcoin Reserve has several potential impacts. It reduces the chance that Bitcoin will be banned by the US Government, drives other nations to establish similar reserves, and accelerates the speed of Bitcoin acceptance. It also creates a challenge for institutions to portray Bitcoin as a risky asset.
What was the market reaction following the announcement of the Strategic Bitcoin Reserve?
Following the announcement of the Strategic Bitcoin Reserve, the price of Bitcoin dropped
around 7% from $91,200 to $84,667. This drop was seen by most observers as a conventional “sell the news” reaction, though market experts argue that the market may have misread the long-term implications of this development.
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