On March 7, Bitcoin experienced a sharp decline, falling 5% to dip below $85,000. As of this writing, the world’s largest cryptocurrency has rebounded slightly, trading at $89,524.32. However, market sentiment remains cautious.
Similarly, shares of MicroStrategy (MSTR), often considered a proxy for Bitcoin exposure, plummeted more than 8% in pre-market trading as investors reassessed their positions. Although MSTR has since recovered slightly, it remains down 4.12% in pre-market movement, reflecting uncertainty over U.S. government policy.
A key factor in the market downturn was the lack of anticipated government Bitcoin purchases. Given MicroStrategy’s heavy reliance on Bitcoin’s price movements, the absence of a strong policy shift led to a decline in its valuation. Many investors had expected a significant market boost following a dovish policy turn, but the announcement instead triggered a wave of sell-offs.
The market reaction followed President Donald Trump’s executive order establishing a national cryptocurrency stockpile. Many speculated this move would prompt large-scale Bitcoin acquisitions by the U.S. government, potentially amounting to billions of dollars. However, the White House clarified that the initiative would only include Bitcoin already held by the government due to previous confiscations and civil asset forfeitures.
“The government will not acquire additional assets for the U.S. Digital Asset Stockpile beyond those obtained through forfeiture proceedings,” stated the White House Fact Sheet.
David Sacks, Trump’s newly appointed “Crypto Czar,” pointed out that had the Biden administration not liquidated previously seized Bitcoin holdings, the U.S. could have gained approximately $17 billion. The restrained approach left many in the crypto community disillusioned.
“This is the most underwhelming and disappointing outcome we could have expected,” remarked Charles Edwards, founder of Capriole Investments. He emphasized that without active government purchases, there was no meaningful development in Bitcoin holdings, calling the situation “a pig in lipstick.”
The absence of new acquisitions suggests a more cautious stance than many crypto advocates had hoped for. Jameson Lopp, co-founder and Chief Security Officer at Casa, highlighted a key concern regarding government-controlled Bitcoin reserves: “A problem with having a Bitcoin reserve under government control is the rules are subject to change with the political winds.”
The cautious approach has left traders uncertain about Bitcoin’s short-term trajectory. Without a definitive commitment to large-scale government buying, market participants may remain wary, keeping volatility high in the coming weeks.
By Alejandro Silva Ramírez, Crypto Analyst & Columnist