Wonder why Bitcoin dropped following the US BTC reserve launch? Wolf of All Streets podcast host Scott Melker explains

Bitcoin Reserve

Donald Trump promised to launch the Bitcoin Reserve during his speech at the Bitcoin Conference in Nashville in the summer of 2024. Around the same time, Senator Cynthia Lummis introduced the BTC Reserve Act, proposing that the US purchase one million bitcoins over five years.

Expectations were high. CryptoX is full of posts expressing hope that Trump would sign an executive order to create the Bitcoin Reserve shortly after his swearing in. The reality was not as exciting, as Trump did not even mention cryptocurrencies in his inaugural address. However, he did pardon Silk Road's Ross Ulbricht, which he promised. Plans for the Bitcoin Reserve were later confirmed, and Senator Lummis joined the Senate Banking Subcommittee on Digital Assets as chair.

An order on the creation of the Bitcoin Reserve was signed on March 6. The reserve turned out to be not what Lummis had proposed. Its spirit is much closer to Trump's original vision, which involved a reserve of confiscated bitcoins that the government would not sell. The reserve will be increased through seizure and confiscation so that taxpayers' money is not used. In addition, the reserve can also be increased in other ways that are not related to taxes.

200,000 Bitcoins stored in the United States

The exact amount is not yet clear, so the government is conducting an audit. The digital asset reserve was created on the same day. It will also include other cryptocurrencies, such as ETH, ADA, SOL and XRP. Some argue that there is a possibility of a conflict of interest, as White House crypto expert David Sachs could indirectly profit by creating a reserve of these cryptocurrencies. Sachs has denied the allegations.

After the creation of the Bitcoin reserve, the price of BTC fell by $5,000, while the creation of Bitcoin's strategic reserve was always considered as a trigger that would unleash the bulls. Scott Melker explains why the price fell and why the move was good despite criticism.

Scott Melker attributes the price drop to the disappointment of those who were expecting massive Bitcoin purchases following the launch of the Bitcoin Strategic Reserve.

Melker begins his newsletter post with the words "We did it," and calls the recognition of Bitcoin as a strategic asset "the biggest step [the US has] ever made in the Bitcoin game." From the start, Melker has been saying that other countries must follow their example in the Bitcoin race. He emphasized that the US cannot afford to be second only to China in BTC reserves. For the time being, the US reserve may be smaller than China's. This sets the stage for a global Bitcoin race that will drive its price even higher in the long run.

Additionally, Melker points out that the difference between the digital asset reserve and the Bitcoin strategic reserve indicates that the US clearly sees Bitcoin as the only cryptocurrency that meets the criteria of a strategic asset worth exploring potential acquisition avenues.

“While some critics argue that this will not have an immediate impact on the market because the government is not yet actively buying bitcoin, they are failing to understand the long-term significance. The US has made it clear that bitcoin will remain as a major financial asset, and history tells us that when the US sets the standard, the rest of the world follows.” As for the price drop, Melker adds another factor, saying that when big news hits "in a volatile market, leverage washes out weak hands." Then big investors come in, causing the price to go up. And look at what actually happened after that. The Wolf of All Streets host further added that the launch of the SBR will increase global demand for Bitcoin, which will lead to a bull run in the long term.

After the details about the BTC reserve were revealed, voices of displeasure were heard across the internet. Many were disappointed with the decision not to spend tax money on buying more Bitcoin. Some even see no particular difference between the US Marshals holding the seized Bitcoin and the US Treasury holding those same coins in the SBR.

Scott Melker felt that this contradicts this view, as it ignores what is written in the executive order, which does not rule out budget-neutral acquisition of BTC in the future.

Jeff Park of Bitwise Invest dismissed the order, saying that there was no strategic point in it. Park said that the whole story of the SBR has been one big 'pump-and-dump' chapter, and he is glad it is over.

Many Bitcoin bulls applauded the move, expressing only mild disappointment and calling the order historic. For example, Senator Lummis expressed her full support for the move despite her bill being rejected. The only issue she raised was the lack of congressional support for the Bitcoin Strategic Reserve.