The Bitcoin price dropped sharply lower following the introduction of a strategic Bitcoin reserve in the U.S.
The reserve will contain roughly 200,000 coins that have been confiscated by the government.
The price of the cryptocurrency plunged after the market assumed that the government would avoid buying additional coins.
However, the government will look for ways to buy additional BTC without using taxpayer funds. Future acquisitions of Bitcoin will likely require congressional approval.
According to data provided by analytics platform Lookonchain, the U.S. government has $16.14 billion by selling BTC prematurely.
Buy the rumor, sell the news
The sharp Bitcoin drop does not come as a surprise given that many expected the market to treat the creation of the reserve as a "sell-the-news" event.
Yuri MolchanBitwise CEO Hunter Horsley has recalled that Bitcoin also sold off following the launch of Bitcoin exchange-traded funds (ETFs) in early 2024.
However, the leading cryptocurrency then went on to reach a new record high shortly after the sell-off.
According to Bitwise CIO Matt Hougan, the introduction of the reserve "dramatically" reduces the likelihood of the government banning Bitcoin. This will also prompt other countries to follow suit by establishing their own Bitcoin reserves.
At the same time, Hougan has rejected the idea that the reserve could turn Bitcoin into an instrument of the government:
"A beautiful thing about Bitcoin is that what you do with it has no effect on me. The only concern would be if the network becomes beholden to the economic suasion of the government as a large holder," Hougan said.
Dan Burgin
Vladislav Sopov