Cryptocurrency prices fell sharply on Monday as market volatility continued after U.S. President Donald Trump signed an executive order to establish a strategic bitcoin reserve for the country. The move, while significant, left investors disappointed as it failed to deliver a more aggressive approach to acquiring bitcoin.
Bitcoin’s Performance
Bitcoin, the world’s largest cryptocurrency, dropped as much as 6.5% earlier in the day, trading around $80,650 before recovering some of its losses. By 4:12 a.m. EDT, bitcoin was trading at $82,050, down 0.74%, according to Coin Metrics.
The decline came in the wake of Trump’s announcement that the reserve would be funded using bitcoins seized in criminal and civil forfeiture cases, with no immediate plans for the government to purchase additional bitcoin. Investors had hoped for a more expansive program involving large-scale acquisitions of the cryptocurrency.
Other Cryptocurrencies See Mixed Performance
The broader cryptocurrency market mirrored bitcoin’s turbulence. Ethereum (ETH) and XRP initially fell by approximately 7.5% but managed to rebound and traded in positive territory by early Monday morning.
Investor Reactions
While the market reaction was largely negative in the short term, some analysts and investors viewed the establishment of a U.S. bitcoin reserve as a bullish move for the long term.
Matt Hougan, Chief Investment Officer at Bitwise Asset Management, expressed optimism. “I absolutely think the market has this wrong,” Hougan said, adding that the disappointment stemmed from the government’s decision not to immediately purchase massive amounts of bitcoin.
He pointed to comments from David Sacks, the White House Crypto and AI Czar, who suggested that the U.S. government could explore “budget-neutral strategies” for acquiring additional bitcoin without placing further financial burdens on taxpayers.
Geopolitical Implications
Hougan emphasized the potential global impact of the U.S. establishing a bitcoin reserve. “The right question to ask is: did this executive order make it more likely that in the future, bitcoin will be a geopolitically important currency or asset? Will other governments look to follow the U.S.’s lead and build their own strategic reserve? To me, the answer to that is emphatically yes.”
This move, according to Hougan, could position bitcoin as a key asset in the geopolitical arena, with the potential to drive its price to $1 million per coin in the long term.
Short-Term Volatility, Long-Term Potential
Despite the immediate downturn in prices, Hougan called the decline a “short-term setback.” He believes that the market will soon stabilize and recognize the long-term bullish implications of the U.S. government’s decision.
“I think the market will soon find its footing and realize that actually this is incredibly bullish long term for this asset and for crypto as a whole,” Hougan stated.
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