After President Donald Trump signed an order to create a US Strategic Bitcoin Reserve on March 7, Bitcoin exchange-traded funds (ETFs) lost almost $370 million. This shook the cryptocurrency market. People thought the move would make people more confident in Bitcoin, but big investors were cautious, which caused the market to drop. Even though the statement was big, it didn’t say that the government would buy Bitcoin directly. This disappointed traders and caused a wave of sell-offs.
Understand Trump’s Bitcoin Reserve Order
President Trump signed an order on March 6 that established a Strategic Bitcoin Reserve and a digital asset stockpile to store other coins. However, at first, these reserves will only include things the government has taken back through court and police actions.
The order also told officials to investigate ways to get more Bitcoin without affecting the budget. This way, any extra purchases wouldn’t cost American taxpayers anything. The move showed that the government was becoming more interested in Bitcoin, but market players were disappointed that there were no large-scale purchases immediately.
Market Reaction and Bitcoin ETF Outflowbs
Google Finance says that Bitcoin’s price dropped more than 2% on March 7 after the news came out. Data from CME Group, the biggest derivatives exchange in the US, also showed that Bitcoin futures contracts dropped by more than 2%, which shows that the market is uncertain.
Institutional investors feared Bitcoin’s risk, which caused $370 million to leave Bitcoin ETFs. Many traders were expecting a straight government-backed Bitcoin buying spree, which caused the market reaction. Because the executive order only covered a small area, it caused what some experts called a “buy the rumor, sell the news” event.
Bitcoin Long-Term Effects
Even though the market initially went down, some experts are still optimistic. Bitwise’s head of research, Ryan Rasmussen, said that the US Strategic Bitcoin Reserve could make other countries and big banks want to add Bitcoin amounts. Â
Conclusion
The massive withdrawals from Bitcoin ETFs show investors are worried about the short term, but creating a US Strategic Bitcoin Reserve could be suitable for the long term. The fact that no one bought Bitcoin right away frustrated traders, but the move makes Bitcoin official nationally, which could lead to institutions and governments adopting it in the future.
