The crypto world is still trying to recover from a reckless week that included a price crash and panic selling due to the unfolding strategy of the American government regarding crypto assets during the Trump presidency. Bitcoin was flirting with all-time highs until it plummeted, dragging all other crypto assets with it into a state of total uncertainty.
This turbulence in the market kicked off with Donald Trump’s shock announcement about a U.S. crypto reserve, which was initially branded as a bitcoin-only “digital Fort Knox,” then switched gears and became a broader “crypto stash” that included Ethereum, Solana, XRP, and Cardano. Furthermore, the government’s slow method of acquiring new bitcoin added to the existing doubt among investors and triggered a massive selloff.
Every Moment of the Terrifying Selloff:
As Markus Thielen, CEO of 10x Research, described, the latest dip under the 80,000 mark for bitcoin sparked the “panic selling” started by short-term holders. Upper cited. Markus Thielen noted, “About 70% of all the selling was from investors who bought the ETF in the last three months, which indicates the predominance of recent entrants panic selling.” Sentiment-driven traders, who are extraordinarily exposed to high market volatility, are particularly dangerous to deal with.
The rest of the market followed Bitcoin’s trend downwards. Ethereum dropped beneath the $2,000 level, a price point that hasn’t been seen since late 2023, while Solana and Dogecoin spearheaded the altcoin’s fall, both flagging almost 6% losses. Zach Burks, the CEO of Mintology, forecasts more pain in the short term, predicting Bitcoin will hit a low of around $72,000 and Ethereum will slip to $1,600, all while the administration continues wrestling with inflation.
The Trump Administration’s “Digital Fort Knox” and the part it plays for the Treasury:
The basis of Trump’s crypto strategy revolves around the initiation of a plan that includes a ‘strategic national bitcoin reserve’ and further, a ‘crypto stockpile.’ Trump’s AI and crypto head, David Sacks, has drawn attention toward the Treasury’s responsibilities of “maximizing value” from these assets. “The purpose of the stockpile is responsible stewardship,” Sacks explained while elaborating on a distinct account controlled by the Secretary of the Treasury.
Yet there is skepticism with the new approach to acquiring bitcoin. The executive order coming from Trump mandates the creation of the reserve to be done with existing government assets instead of free-spending taxpayer funds. Sacks describes this budget-neutral strategy—using seized assets instead of investing money in buying them—but many investors feel underwhelmed.
The Missed Opportunity and the $16 Billion Blunder:
Trump himself has pointed out the selling of seized government bitcoin as a “foolish” move. Sacks expanded on this further, claiming the U.S. may have lost nearly $16 billion by auctioning off its bitcoin value too early. “At one point in time we had roughly 400,000 bitcoin on the federal balance sheet,” Sacks revealed. “We sold roughly half of that for something like 360 million dollars total. If we had held all that, just the portion we sold would be worth over 17 billion dollars.”
This information has sparked new waves of criticism around older policies while also reiterating the opportunity a long-term hodl approach could have had.
The Global Crypto Race and Potential China Reaction:
The crypto initiative by Trump has already generated theories of a new global crypto competition, while analysts suggest China is thinking of a bitcoin reserve of its own. This statement was further backed by Abu Dhabi’s sovereign wealth fund’s recent announcement regarding their bitcoin investment.
Analysts from Tagus Capital remarked, “The U.S. bitcoin reserve increases the chances of other nations having similar reserves and speeds up their contemplation of such plans.” The global economic order might undergo transformational changes with the United States, hypothetically, adopting bitcoin reserves in a similar fashion to how they implemented the dollar as the world’s reserve currency.
The Increased Volatility:
Co-founder of BitMex, Arthur Hayes, has predicted a “violent” level of volatility if bitcoin suddenly crashes beneath the $70k threshold. Despite the severe risks national bitcoin reserves pose for the future, uncertainty remains until further notice. Agne Linge, WeFi’s head of growth, attributed the market’s current volatility context to having a “clearly poor strategic bitcoin reserve posture” taken by the officials in charge.
Panic selling and post-election selling are likely to lead to higher volatility in the crypto market. Whether it’s a temporary bounce or the start of a more extended bear market remains uncertain. What is for sure is that we are witnessing a major shift in cryptocurrency markets, and the upcoming months will determine the direction for the next few years.
