Bitcoin has fallen from its post-election highs, with the cryptocurrency on track to end the first quarter of 2025 in the red. From the start of 2025, Bitcoin witnessed a shaky trend, weighed down by speculation that the Fed may have limited scope for further interest rate cuts. Bitcoin is down about 7% so far this year (as of March 26, 2025).
Investor sentiment shifted on the likelihood of a prolonged pause in Fed rate changes due to uncertainty related to inflation. Concerns also emerged over the potential inflationary impacts of President Donald Trump’s tariffs and immigration policies.
Bitcoin, which skyrocketed following Trump’s election win on hopes of a reserve, found the actual government move underwhelming. In early March, there was an executive order by President Donald Trump to establish a strategic Bitcoin reserve for the United States.
The reserve will be funded using Bitcoin seized in criminal and civil forfeiture cases, with no plans for the U.S. government to purchase additional Bitcoin at this time. Investors were disappointed that the government did not introduce a more aggressive Bitcoin acquisition program.
Despite the market’s negative reaction to Bitcoin in the first quarter, some investors believe that the government move is bullish for the long term. Matt Hougan, CIO at Bitwise Asset Management, told CNBC’s Squawk Box Asia that the market may be misinterpreting the announcement. The market is short-term disappointed that the government didn’t say it was immediately going to acquire 100,000 or 200,000 Bitcoin, per Hougan.
White House Crypto and AI Czar David Sacks hinted at possible future Bitcoin acquisitions, stating that the U.S. government would explore budget-neutral strategies that impose no extra costs on taxpayers. However, any additional purchases beyond seized assets would require further executive or legislative action.
Fed Chair Jerome Powell recently equated the cryptocurrency Bitcoin to gold rather than the U.S. dollar, stating, “People use Bitcoin as a speculative asset. It’s like gold — it’s just virtual and digital.” Interestingly, BlackRock’s spot Bitcoin-based ETF iShares Bitcoin Trust IBIT (launched earlier in 2024) now has more than $48 billion in net assets. That’s more than BlackRock’s iShares Gold Trust IAU ETF, which debuted in 2005 and has $41.1 billion in assets (read: Is Bitcoin the Digital Gold? ETFs in Focus).
