Analysis of Trump’s Crypto Reserve Policy

Policy Background and Core Content

On March 7, 2025, President Trump signed an executive order establishing a U.S. strategic Bitcoin reserve. This reserve is based on approximately 200,000 bitcoins (worth around USD 17 billion) acquired by the federal government through criminal or civil forfeiture procedures. The policy explicitly commits to “not spending taxpayer funds to buy new bitcoins” and “not selling existing reserve assets.” The aim is to incorporate Bitcoin into the national strategic asset framework. However, because the policy relies solely on a “lock in” strategy using forfeited assets rather than actively purchasing additional bitcoins as market expectations would suggest, Bitcoin’s price fell by 6% on the day of the announcement, dropping from USD 91,000 to USD 85,000.

According to JuCoin data, the announcement triggered over USD 1 billion in derivative liquidations within 24 hours, reflecting leveraged funds’ disappointment with the policy’s strength. Although the policy confirms Bitcoin’s status as a “store of value,” its essence is one of “locking in existing supply” rather than “incremental buying,” and it fails to provide the liquidity support that the market expected.

Market Reaction and Short-Term Impact

While Trump’s policy carries symbolic weight, the lack of actual buying activity has triggered sell-offs. Bitcoin’s price quickly dipped to USD 85,000 following the announcement, with major tokens such as Ethereum and SOL also falling by over 10%. Market sentiment was sharply divided: long-term investors viewed the policy as a sovereign credit endorsement for Bitcoin’s “digital gold” narrative, whereas short-term traders worried that the government’s inability to expand the reserve through market purchases would undermine upward price momentum.

The price drop also highlighted market sensitivity to policy details. For example, the executive order mentioned a “U.S. Digital Asset Reserve” that would include other forfeited cryptocurrencies (like XRP and SOL), but it did not specify detailed management rules, exacerbating regulatory uncertainty. Moreover, the 200,000 bitcoins held by the federal government have never undergone a full audit; although Trump’s call for comprehensive accounting was meant to enhance transparency, it might also expose potential issues in historical operations and further affect investor confidence.

Long-Term Impact and Policy Potential

Despite the short-term setback, Trump’s crypto reserve policy brings structural benefits to the industry. First, for the first time, Bitcoin is being incorporated as a sovereign national strategic asset, which could prompt other nations—especially emerging markets reliant on the dollar—to follow suit. Second, the U.S. government’s commitment to hold forfeited bitcoins over the long term theoretically reduces circulating supply by about 1%, providing a floor for the price. Additionally, Trump’s simultaneous relaxation of regulations, allowing companies to classify Bitcoin as a “tangible asset,” could encourage more institutions to disclose holdings and participate in the market.

The policy also paves the way for state-level legislation. Republican-led states such as Texas and Utah are fast-tracking local crypto reserve bills (for example, Texas’ SB21, which plans to allocate 5% of fiscal funds to crypto assets). If both federal and state policies align, it could attract long-term capital from pension funds and insurance companies.

Potential Risks and Future Outlook

Trump’s policy faces several challenges:

• Sustainability Risk: If Trump is not re-elected in four years, Democrats may overturn the current framework, leading to policy reversals.
• Fiscal Constraints: With high federal deficits, the government may struggle to finance new Bitcoin purchases via debt issuance; incremental reserves would then rely solely on forfeited assets, limiting growth.
• Market Manipulation Controversies: Allegations have emerged that World Liberty Financial, a Trump-affiliated DeFi platform, increased its crypto holdings before the policy announcement, raising insider trading concerns.

Looking ahead, the market must monitor two key points:

1. The direction of policy refinement at the White House Crypto Summit in March 2025, particularly regarding the integration of state reserves with the federal framework.
2. Whether Bitcoin can recover its price in a more favorable macro environment (for instance, if interest rate cut expectations rise).

While Trump’s crypto reserve policy did not meet short-term market expectations, its confirmation of Bitcoin’s status as a sovereign asset lays a long-term institutional foundation for the industry. In an environment where policy benefits and risks coexist, rational evaluation of fundamentals and regulatory trends will be key to making informed investment decisions.