By Brett Munster
Bitcoin Strategic Reserve becomes a reality
In our first newsletter of 2025, we explored the concept of a Strategic Bitcoin Reserve—what it could look like, why it might be pursued, and the massive geopolitical implications such a move could carry. At the time, however, details were scarce. We had only campaign promises from then-candidate Donald Trump and an early draft of a bill from Senator Cynthia Lummis. A few weeks later President Trump signed an executive order directing the newly established Digital Assets Council to evaluate the creation of a digital asset stockpile.
Then last week, the Strategic Bitcoin Reserve suddenly became a reality. On Thursday, March 6, President Trump signed an Executive Order in the Oval Office to establish a Strategic Bitcoin Reserve and a Digital Asset Stockpile. This executive order accomplishes three key objectives.
First, the order officially reclassifies the approximately 198,000 BTC currently held by the U.S. government as a Strategic Bitcoin Reserve asset. The U.S. will not sell any bitcoin in the reserve, treating it instead as a store of value akin to a “digital Fort Knox.” This decision positions the U.S. government as one of the largest bitcoin holders globally. The executive order explicitly recognizes bitcoin as a store of value on par with gold, citing its 21-million supply cap and digital scarcity as key factors.
Second, the order grants Treasury Secretary Scott Bessent and Commerce Secretary Howard Lutnick the authority to develop “budget-neutral” strategies for acquiring additional bitcoin, provided these strategies do not impose incremental costs on American taxpayers.
Third, the order mandates a full audit of all digital assets currently in government possession and directs the U.S. government to hold these assets in a “Digital Asset Stockpile.” However, it explicitly states that no additional assets will be acquired for the stockpile beyond those obtained through forfeiture proceedings.
Now, let’s analyze the implications of this decision.
First, the executive order takes a balanced and well-reasoned approach. It correctly distinguishes bitcoin as a strategic reserve asset, recognizing its unique characteristics—finite supply, connection to low-cost energy, and unmatched security through the strongest computing network on Earth. Historically, the U.S. has stockpiled strategic commodities such as gold and oil. Bitcoin fits that mold.
Conversely, assets like Ethereum, Solana, and others function more like technology platforms than digital gold. While these assets have significant value (and our fund holds substantial positions in Ethereum and Solana), they do not align with the traditional framework of a national strategic reserve. The U.S. government does not (and should not) allocate capital like an investment fund—it doesn’t buy stocks, and it shouldn’t purchase other crypto tokens either. If the U.S. were to create a sovereign wealth fund, a broader mix of digital assets might make sense. However, in the context of a strategic reserve, bitcoin stands alone.
This executive order carefully balances those considerations by distinguishing bitcoin as a strategic asset. Currently, the U.S. government holds approximately $18 billion worth of bitcoin, primarily from asset seizures. While it also holds other crypto assets, bitcoin comprises over 98% of the total value of its digital asset holdings. Retaining these other assets rather than selling them carries little downside. At the same time, the government signals openness to other tokens like ETH, SOL, and others by maintaining a digital asset stockpile, albeit without actively acquiring more. The decision not to buy any cryptoasset beyond bitcoin is a sound one.
Second, the order creates an avenue for Bessent and Lutnick to start purchasing additional bitcoin on behalf of the U.S. government. The executive order states: “The Secretaries of Treasury and Commerce are authorized to develop budget-neutral strategies for acquiring additional bitcoin, provided that those strategies have no incremental costs on American taxpayers.” This provision allows for bitcoin accumulation while addressing concerns from critics who oppose increased government spending on digital assets. Essentially, both sides win—crypto advocates see accumulation, while skeptics face no added taxpayer burden.
Bessent and Lutnick have multiple options for acquiring more bitcoin without relying on taxpayer funds. The most probable approach is utilizing the Exchange Stabilization Fund (ESF), as we discussed in January. Historically, the ESF has been used for various purposes, from purchasing gold after World War II to supporting loans during the 2008 financial crisis and the COVID-19 pandemic. With $39 billion at its disposal, the ESF could facilitate bitcoin purchases without burdening taxpayers. Beyond that, it will be intriguing to see what strategies they employ to accumulate bitcoin.
The day after the Executive Order, Trump stated, “The Treasury and Commerce departments will explore new pathways to accumulate additional bitcoin holdings for the reserve.” This strongly suggests that the U.S. government will begin buying bitcoin in the near future.
Third, this executive order does not preclude Congress from passing legislation, such as the bill introduced by Senator Cynthia Lummis, which is currently under Senate consideration. While legislation would provide a more permanent framework than an executive order, the legislative process is slow and politically complex. This executive order allows bitcoin accumulation to begin immediately while giving Congress time to pass a broader, more enduring initiative.
Fourth, the global bitcoin game theory is now in full swing. While the race to acquire bitcoin had already begun, America’s official establishment of a bitcoin reserve marks an inflection point. If the U.S. is accumulating bitcoin, it significantly increases the likelihood that other nations will follow suit to avoid being left behind. If an asset with a fixed supply is now deemed a strategic advantage by the world’s largest superpower, other nations will be incentivized to buy immediately. Brazil already approved a bitcoin reserve last week. China is rumored to be considering one. Expect a domino effect as countries rush to secure their share before potential U.S. acquisitions further limit availability. The global race to accumulate bitcoin is officially on.
Finally, this move makes it significantly harder for institutions to dismiss bitcoin as inappropriate to hold in their own portfolio. Wealth managers, financial institutions, pensions, and endowments now have no excuse. Expect further adoption from institutions and states.
The executive order sends a clear message to the world: The most powerful government on Earth views bitcoin as a strategic store of value, on par with gold. One of the largest holders of bitcoin has announced that not only will it not sell any, but it is also looking to acquire more. This shift will turn heads across the financial world, making it far easier for institutions and countries to justify bitcoin allocations.
As we noted earlier this year, the establishment of a Strategic Bitcoin Reserve is one of the most groundbreaking economic moves in U.S. history. It positions the country as a leader in the global digital asset economy. Over time, this decision could prove as consequential as Executive Order 6102, which confiscated citizens’ gold in 1933, Nixon’s 1971 abandonment of the gold standard, and the 2008 bank bailout. However, unlike those past events—which were largely reactions to crises—this move is proactive, positioning the U.S. for long-term strength in the digital asset era.
History once again repeats itself
When bitcoin first crossed its all-time high of $70,000 a year ago, we noted that historically, this moment marks the beginning of the most significant gains in a bull market. We also cautioned that while price appreciation would likely continue into 2025, it wouldn’t be a smooth, uninterrupted rise. Instead, sharp pullbacks would occur along the way. February’s market correction—one of the most significant since the FTX collapse—validated this historical pattern once again. As with every cycle, panic set in, with many fearing that the bull market had ended. But as history shows, this type of volatility is entirely normal, and we are far from entering a prolonged bear market.
Looking back at previous cycles, bitcoin has consistently endured multiple 20%+ corrections before reaching its ultimate peak. In 2013, bitcoin skyrocketed 8,660% within a year but faced at least five corrections of 20% or more.
Source: CoinMarketCap
The 2017 bull run saw a 4,443% gain while enduring five similar major drawdowns.
Source: CoinMarketCap
Even in the more moderate 2021 cycle, Bitcoin climbed 858%, punctuated by at least five significant pullbacks.
Source: CoinMarketCap
The current cycle is following the same script. Since January 2024, bitcoin has already experienced three pullbacks exceeding 20%. In May, it fell 20%, followed by a 21% drop in August, yet still ended the year with a 121% gain. February’s 23% decline was simply the latest in a series of expected corrections. If history is any guide, we should anticipate at least one or two more before this cycle reaches its peak. While these retracements may feel painful in the moment, they serve an essential role in resetting market conditions, shaking out excessive leverage, and setting the stage for the next leg higher.
The root cause of February’s correction was macro-driven uncertainty rather than any fundamental weakness in crypto adoption. Early in the month, President Trump announced sweeping tariffs: 25% on Canada and Mexico and 10% on Chinese imports. Given that crypto trades 24/7, it often reacts more immediately to global developments than traditional markets. As risk-off sentiment took hold, funds and macro traders preemptively sold crypto assets, sparking the sector-wide decline.
The sell-off intensified when Trump doubled down later in the month, confirming the tariffs while adding a 25% penalty on European imports. Many had hoped for last-minute negotiations, but instead, the U.S. moved forward with aggressive trade measures, spooking markets further. Bitcoin fell to $83,800—a 23% drop from its recent all-time high. However, this move was not due to a shift in bitcoin’s fundamentals but rather short-term uncertainty in broader markets.
Despite short-term volatility, all the bullish tailwinds we identified at the start of the year remain firmly in place. Regulatory clarity is improving at an accelerating pace: the SEC has not only repealed SAB 121 but also dismissed several lawsuits against major crypto firms, including Coinbase, Gemini, and Kraken. The FDIC has ended Chokepoint 2.0, and Congress has introduced multiple bills to establish a clear regulatory framework for digital assets.
Meanwhile, demand continues to grow. Retail adoption is evident, with Coinbase consistently ranking among the top finance apps and Robinhood’s crypto trading revenue soaring 733% year-over-year. Institutional interest is surging as well. Recent 13F filings reveal that over 1,600 institutions now hold Bitcoin ETFs, with professional investors increasing their share of Bitcoin ETF assets from 17% in Q3 to 28% today, and projections suggesting that number will exceed 40% by year-end. More public companies are incorporating bitcoin into their balance sheets, while 24 U.S. states have introduced strategic bitcoin reserve bills, with Texas, Utah and Arizona now in the final stages of approval. On a global scale, sovereign accumulation is accelerating, with Abu Dhabi recently purchasing $500 million in bitcoin and the U.S. officially creating both a Bitcoin Strategic Reserve and a Digital Asset Stockpile.
At the same time, supply is drying up. Bitcoin available on exchanges continues to hit new lows, tightening liquidity at a time when demand is accelerating. Additionally, global liquidity is beginning to rise again, a trend likely to continue throughout 2025. Ironically, Trump’s tariffs could further fuel inflation, pushing the Federal Reserve to cut interest rates or expand its balance sheet—moves that would provide a strong tailwind for risk assets like crypto.
While there’s always a risk of further downside in the short term, the broader thesis remains unchanged. Adoption is growing, supply is shrinking, global liquidity is rising, and the regulatory environment is rapidly improving. February’s pullback wasn’t the start of a bear market—it was just another expected correction within an ongoing bull cycle. History shows that these pullbacks are normal, healthy, and often the best buying opportunities of the entire cycle. If you have the patience to zoom out, you’ll see that we’re still right on track. And if you have dry powder, now might be the time to put it to work.
Source: Glassnode
In Other News
Top market maker Citadel is planning on entering the crypto industry to further boost liquidity on major exchanges.
BlackRock adds IBIT Bitcoin ETF to their alternative asset model portfolio.
The Senate resolution to erase the IRS’ DeFi-focused crypto broker rule passed with a massive majority.
Texas surges in U.S. states’ race to put public funds into crypto.
Coinbase exec says Trump’s bitcoin reserve could remove $18 billion of sell-side pressure.
US bank regulator OCC reaffirms banks can engage in some crypto activities.
Disclaimer: This is not investment advice. The content is for informational purposes only, you should not construe any such information or other material as legal, tax, investment, financial, or other advice. Nothing contained constitutes a solicitation, recommendation, endorsement, or offer to buy or sell any securities or other financial instruments in this or in any other jurisdiction in which such solicitation or offer would be unlawful under the securities laws of such jurisdiction. All Content is information of a general nature and does not address the circumstances of any particular individual or entity. Opinions expressed are solely my own and do not express the views or opinions of Blockforce Capital.
Disclaimer: This is not investment advice. The content is for informational purposes only, you should not construe any such information or other material as legal, tax, investment, financial, or other advice. Nothing contained constitutes a solicitation, recommendation, endorsement, or offer to buy or sell any securities or other financial instruments in this or in any other jurisdiction in which such solicitation or offer would be unlawful under the securities laws of such jurisdiction. All Content is information of a general nature and does not address the circumstances of any particular individual or entity. Opinions expressed are solely my own and do not express the views or opinions of Blockforce Capital or Onramp Invest.
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