The Bitcoin Strategic Reserve Happened….Now What?

Trump Signed The Executive Order for a Bitcoin Strategic Reserve Last Week
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After much lobbying and bloviating and worrying from crypto traders, last week Donald Trump signed an executive order (EO) to create a Strategic Bitcoin Reserve. Many believed this would set off a massive rally as demand for bitcoin surged. However, the market has collapsed instead, with heavy liquidations on long-leveraged speculators. What happened – and what happens next?
First, the specific details of the reserve really only functioned to prevent selling off existing bitcoin held by the government. And more than half of the ~200,000 BTC held by the government likely belongs to victims of hacks, like Bitfinex, and will be returned. The EO states that the administration may seek to find budget neutral methods of acquiring more bitcoin as well. Coupled with Trump’s somewhat glib behavior around the signing of the order and ensuing comments - “They say never sell your bitcoin, who the hell knows?” - the market has not yet viewed the decision as monumentally as crypto Twitter acolytes had prayed.
In part, this stems from a challenging macro environment. Equities have sold off sharply as tariff fears and instability plague the market. The yen carry trade has unwound, signaling reduced liquidity for risk assets. The FED’s reverse repo has run dry, signaling much of the same. Though many hope bitcoin functions as a store of value, like gold, most trade it like a highly speculative asset. As a consequence, bitcoin has led the recent drawdown.
Further, the transient power of an executive order, vagaries around acquiring more bitcoin, and intermingling commentary about the government holding other altcoins, have not sent a definitive message to the market and other nations that the strategic reserve is more than a political stunt for Trump supporters.
A view of derivatives markets shows that open interest has remained largely unmoved since the announcement. Skew has turned negative. This suggests institutional investors are protecting against a downside move at present.