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Government Directive Establishes Strategic Bitcoin Reserve – What is Causing the Decline in BTC Value?
US President Donald Trump has officially signed an executive order to create a strategic Bitcoin reserve, marking a significant moment for the oldest and largest cryptocurrency. However, the immediate market reaction has resulted in a decline in BTC value.
The BTC price was last trading around $87,000, reflecting a 3% decrease so far on Friday, as the market appears to be dissatisfied with the announcement regarding the strategic Bitcoin reserve.
According to a tweet from White House crypto and AI advisor David Sacks, the reserve will initially be funded by Bitcoin already held by the federal government, estimated to be around 200,000 coins.
Just moments ago, President Trump signed an Executive Order to establish a Strategic Bitcoin Reserve.
The Reserve will be funded with Bitcoin owned by the federal government that was forfeited as part of criminal or civil asset forfeiture proceedings. This means it…— David Sacks (@davidsacks47) March 7, 2025
Sacks mentioned that the Secretaries of Treasury and Commerce have also been authorized to devise budget-neutral strategies for acquiring new Bitcoin.
This may be where the market’s initial disappointment stems from—some traders might have anticipated that the executive order would include commitments to enhance the strategic Bitcoin reserve with additional BTC.
Several analysts had been promoting the potential of the reserve to generate new demand in the market this week.
Among them is Bitwise CIO Matt Hougan, who had emphasized the idea of the reserve being “larger than people think.”
“After the dust settles, I believe the final reserve will be almost entirely Bitcoin, and it will be larger than people think”
— Matt Hougan, Bitwise pic.twitter.com/lcRlAOGAOD— Swan (@Swan) March 6, 2025
If the market continues to view the strategic Bitcoin reserve announcement as underwhelming, it could create an opportunity for the BTC price to “catch up” to this week’s lackluster performance in the US stock market.
Stocks have faced pressure this week amid concerns regarding US economic weakness, attributed to DOGE austerity, Trump trade wars, and troubling GDP forecasts.
The Atlanta Fed’s updated GDPNow model is currently predicting a 2.4% (annualized) decline in GDP for the first quarter of 2025.
On March 6, the #GDPNow model nowcast of real GDP growth in Q1 2025 is -2.4%: https://t.co/T7FoDdgYos. #ATLFedResearch
Download our EconomyNow app or visit our website for the latest GDPNow nowcast: https://t.co/NOSwMl7Jms. pic.twitter.com/O5JIP7TgtS— Atlanta Fed (@AtlantaFed) March 6, 2025
Short-term technical indicators also suggest a bearish outlook for the BTC price. The cryptocurrency has consistently encountered resistance at its 21DMA in recent weeks, indicating that bears are currently influencing the market’s near-term momentum.
Nonetheless, BTC has managed to remain above its 200DMA and appears to have formed a short-term pennant pattern.
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A bearish breakout from this pattern, combined with a significant drop below the 200DMA, could confirm the near-term bearish market trend.
Should Investors Buy the BTC Price Dip?
If the BTC price declines in the short term, this could present a substantial opportunity for investors to acquire Bitcoin at a favorable price.
Indeed, macro uncertainties are currently high. As the US economic situation deteriorates and the threat of a recession looms larger, risk appetite may take another hit, which could impact Bitcoin.
However, Bitcoin possesses numerous long-term advantages that suggest this will not signify “the end” of the bull run.
The US government’s initiative to establish a strategic Bitcoin reserve serves as a significant endorsement of the asset, even more substantial than the ETF approvals in early 2024.
Institutions had already been accumulating BTC at a record pace over the past year. This trend is likely to accelerate following the establishment of the strategic Bitcoin reserve.
Additionally, this move will attract global attention, potentially igniting a competition among nation-states to acquire BTC.
When the leader (the USA) acts, the followers (the rest of the world) will likely respond.
2025 is poised to be a record year for overall Bitcoin adoption, and if a US recession is imminent, a surge in liquidity may also be on the horizon.
US economic weakness would likely be accompanied by Fed rate cuts and possibly even quantitative easing and other forms of liquidity injection.
And just like that, the market is now anticipating three full Fed Fund rate cuts by the end of the year. pic.twitter.com/6OswuTCfs6
— James Lavish (@jameslavish) March 4, 2025
This has historically been a significant positive for the BTC price. The risks appear to be heavily weighted to the upside for Bitcoin in the coming years.
Price dips should be viewed as opportunities to accumulate aggressively.
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