Trump's Bitcoin Reserve Disappoints: Just a 'Pig in Lipstick' Say Critics
A reserve made up of BTC that the Fed already had?
A reserve made up of BTC that the Fed already had?
President Donald Trump’s announcement of a U.S. Strategic Reserve of Bitcoin finally came after many false-starts and fake-outs, coming on the eve of the first White House Summit on cryptocurrency.
While some may have expected that the announcement would finally see a return to the bullish price action of early 2025, instead it has been widely criticized as a symbolic and hollow move rather than a meaningful policy action.
A Bitcoin ‘nothing-burger’
The substance of the announcement seemed underwhelming to say the least. Aside from reading like a transparent attempt to appease hardcore Bitcoiners by parroting a few of the more common tropes about BTC, the announcement had little to commend it:
Purpose of the Reserve: The statement affirmed that the reserve is intended to treat Bitcoin as a strategic asset, akin to “digital gold,” and to position the U.S. as a leader in digital asset strategy.
Funding Source: The reserve will be funded exclusively with Bitcoin already seized by the federal government through criminal and civil forfeiture cases. No taxpayer money will be used. In essence then, there’s no undertaking to grow the reserve by investing further. Instead, the reserve will ‘inherit’ the Bitcoin already in the U.S. Government’s possession.
Long-Term Vision: The Bitcoin in the reserve will not be sold but maintained as a store of value, emphasizing its role as a reserve asset. Buy and hold is the favored investment model for committed Bitcoiners, but they had also hoped that the U.S. Government would increase its holding of BTC to reflect its belief ina long-term gain in value.
Digital Asset Stockpile: Far from walking-back recent announcements of other crypto reserves that had caused jitters amongst Bitcoin maximalists, Trump confirmed that alongside the Bitcoin reserve, a U.S. Digital Asset Stockpile will be established to manage other confiscated cryptocurrencies.
Strategic Management: The order mandates a comprehensive review of federal digital asset holdings and authorizes the Treasury and Commerce Departments to develop budget-neutral strategies for acquiring additional Bitcoin. Such a strategy would seem to rely largely on further confiscation of BTC from criminals rather than buying it on the open market.
By merely formalizing custody of Bitcoin already held from criminal seizures without committing to purchase additional Bitcoin, the initiative lacks any real financial or strategic impact.
This announcement also falls short of the ambitious economic and technological promises Trump made during his second campaign, highlighting a pattern of under-delivery since his return to the White House.
A hollow move
Reception of Trump’s announcement was predictably muted, with critics within the Bitcoin community. In a post on X, Charles Edwards of Capriole Investments appeared to capture the mood of Bitcoiners perfectly:
As he put it:
“This is the most underwhelming and disappointing outcome we could have expected for this week… a pig in lipstick.”
The reason for Edwards’ sentiment — shared by many — are simple:
No New Acquisition of Bitcoin: The reserve relies solely on existing Bitcoin seized during law enforcement activities. Without plans to buy more, there is no injection of new capital into the Bitcoin market, undermining the potential for this move to bolster Bitcoin’s legitimacy or stimulate its growth.
Lack of Tangible Utility: There is no clear plan for how the reserve will be used. Unlike traditional strategic reserves (e.g., oil), which serve a clear economic or security purpose, a Bitcoin reserve without a practical function raises questions about its necessity and value.
Failure to Address Market Dynamics: Bitcoin’s price is driven by supply and demand. By signaling no intention to expand holdings, the announcement may have spooked investors, contributing to the recent significant price drop. Markets view the move as a sign of weak institutional support for Bitcoin.
Market Reaction and Broader Implications
The lack of commitment from the U.S. government to actively participate in the Bitcoin market has likely been interpreted as a bearish signal by investors. The immediate price drop — to lows beneath the $80k level — reflects skepticism about the announcement’s substance and its potential to enhance Bitcoin’s role in the global financial system.
Critics argue that this announcement is emblematic of President Trump’s second term so far, which has seen a gap between his rhetoric and tangible actions. On the campaign trail, Trump emphasized bold economic initiatives, including leveraging blockchain and cryptocurrency to secure America’s technological edge.
His administration has thus-far delivered limited progress on these fronts, leaving many to question the sincerity and effectiveness of these efforts. The seemingly improvised and haphazard approach to crypto policy, together with the chaotic implementation (and redaction) of trade tariffs has thrown the economy into a tailspin.
Time will tell how this all plays out, but in the meantime Bitcoiners are left with little option to buy the dip and take a longer term view.
Note: This article is for informational purposes only. It should not be considered Financial or Legal Advice. Consult a financial professional before making any major financial decisions.