TLDR
- Bitcoin fell to $85,000 after details of the U.S. strategic reserve were announced
- The reserve will use existing government-owned Bitcoin from forfeitures, not new purchases
- Market experienced over $500 million in liquidations with $400 million in long positions
- Bitcoin recovered to around $88,000 after initially falling from a 24-hour high of $91,000
- BlackRock and other ETFs saw significant outflows totaling $134.26 million
Bitcoin (BTC) experienced a price drop following President Donald Trump’s announcement of a U.S. strategic Bitcoin reserve. The cryptocurrency fell from around $91,000 to $85,000 before recovering to trade at approximately $88,000.
The world’s largest cryptocurrency tumbled overnight as traders reacted to details of the strategic reserve plan.
Bitcoin had shown signs of recovery earlier this week when it climbed back above $90,000. However, the digital asset is now under pressure again following the government announcement.
President Donald Trump signed an executive order to establish a strategic Bitcoin reserve on Thursday. The reserve will also include other digital assets as part of a government stockpile.
What disappointed traders was a key detail about how the reserve would be funded. According to White House crypto czar David Sacks, the government won’t be buying any new Bitcoin for the reserve.
Sacks explained on social media platform X that “The Reserve will be capitalized with Bitcoin owned by the federal government that was forfeited as part of criminal or civil asset forfeiture proceedings. This means it will not cost taxpayers a dime.”
Deutsche Bank strategist Jim Reid noted that cryptocurrencies fell because the stockpile will use assets already owned by the federal government. There would be no new government funding going into Bitcoin purchases.
The market reaction was swift, with the broader crypto market seeing 24-hour liquidations exceeding $500 million. Long positions accounted for $400 million of these liquidations.
Despite the pullback, Bitcoin quickly found support at lower levels. The price recovered from its 24-hour low of $84,713 to trade around $88,095.
Technical analysts note that Bitcoin is currently consolidating between key Fibonacci retracement levels. The price trend is approaching the bottleneck of a symmetrical triangle pattern, which some interpret as a potential signal for a breakout rally.
Supporting indicators include a positive crossover between the MACD and signal lines. The daily RSI remains slightly below the 50 level, reflecting mild bullish momentum.
Strategic Reserve Plans
One bright spot for Bitcoin bulls is that the strategic reserve means the U.S. government will hold onto its Bitcoin rather than selling it. The government currently holds 198,109 bitcoins, worth approximately $17.41 billion.
By implementing the Bitcoin reserve, the market may be spared from $17 billion in potential selling pressure. This represents the value of Bitcoin the U.S. government has historically sold over the past decade.
U.S. Bitcoin spot ETFs saw major outflows on March 6, totaling $134.26 million. BlackRock led the outflows, moving $50.5 million worth of Bitcoin into the market.
Other ETF providers also saw outflows, with Grayscale ($34.51 million), Franklin ($18.05 million), ARK and 21Shares ($17.76 million), VanEck ($8.18 million), and WisdomTree ($5.19 million) all experiencing net negative flows.
Market watchers now look to a White House crypto summit scheduled for later in the day. The summit and potential additional crypto-friendly announcements could still spark more positive sentiment in the market.
