Why Did Bitcoin Drop After the US Launched the Bitcoin Reserve? Scott Melker Explains
On March 7, 2025, crypto investor and “Wolf of All Streets” podcast host Scott Melker devoted a large portion of his Wolf Den newsletter to discussing the launch of the US Bitcoin Reserve and the reaction from the community. Later in the day, he shared additional comments via his X account, explaining the historical significance of the event.
- The Creation of the US Strategic Bitcoin Reserve
- The Price Drop Explained
- Other Reactions
The Creation of the US Strategic Bitcoin Reserve
During his speech at the Nashville Bitcoin Conference in the summer of 2024, Donald Trump promised to launch a Bitcoin reserve. At the same time, Senator Cynthia Lummis introduced the BTC Reserve Bill, proposing that the US should buy one million bitcoins within five years.
Expectations were high, with many believing that Trump would sign an executive order to create a Bitcoin reserve shortly after taking office. However, in his inaugural address, he made no mention of cryptocurrencies, instead pardoning Silk Road’s Ross Ulbricht, another pledge that was fulfilled. The Bitcoin reserve plan was later confirmed, with Senator Lummis becoming Chairman of the Senate Banking Subcommittee on Digital Assets.
On March 6, 2025, the executive order on the Bitcoin Reserve was signed. This reserve differs from Lummis’ proposal, with the content being closer to Trump’s original vision of building the reserve from seized bitcoins that would not be sold. The reserve would continue to grow through asset seizures without using taxpayer money. Additionally, the reserve could be expanded through other methods that did not require taxpayer money.
The United States currently holds around 200k bitcoins, but the exact amount is unknown and is being audited. A Digital Asset Reserve was also created on the same day, which includes other cryptocurrencies such as ETH, ADA, SOL, and XRP. However, some have suggested that David Sacks, the White House's "crypto czar," could benefit from the launch of these crypto reserves, but he has denied the allegations.
- Elizabeth Warren investigates David Sacks' relationship with Bitwise in the crypto reserve plan.
After the Bitcoin Reserve was created, the BTC price dropped by $5,000, contrary to expectations that the launch would boost the market. Scott Melker explains what caused the price drop and why it is still a positive move.
Explaining the Price Drop
Scott Melker links the drop to disappointment from the community as expectations that the US government would immediately buy Bitcoin in large quantities did not materialize.
In the newsletter, Melker wrote that, “we have reached a major milestone,” describing the recognition of Bitcoin as a strategic asset as “the biggest move by the US in the Bitcoin game.” He noted that other countries will be forced to join this Bitcoin race and that the US will not accept being behind China in terms of BTC reserves. The US’ current reserves may be smaller than China’s, but Melker believes this is just the beginning of a global race that will push Bitcoin prices higher in the long term.
Furthermore, Melker pointed to the distinction between the Digital Asset Reserve and the Strategic Bitcoin Reserve as evidence that the US sees Bitcoin as the only cryptocurrency that fits the criteria of a strategic asset.
“Critics ignore the long-term implications of this move, arguing that the lack of immediate buying action has no impact. The US has sent a strong signal that Bitcoin will be an important financial asset, and when the US sets the standard, the rest of the world will follow,” Melker emphasized.
As for the price drop, Melker said that when big news hits an illiquid market, leverage will weed out weak investors. He believes this paves the way for big investors to come in and push the price back up.
Other Reactions
The internet was abuzz after details of the BTC Reserve were revealed, with many expressing disappointment that the government did not use tax money to buy more Bitcoin. Some argued that there is no big difference between Bitcoin seized due to previous legal actions and Bitcoin currently in the Strategic Bitcoin Reserve.
Scott Melker countered these sentiments, noting that the executive order does not preclude future purchases of BTC through non-fiscal means.
Jeff Park of Bitwise Invest criticized the executive order, calling it part of a short-term price pump. However, many Bitcoin advocates praised the move, calling it a historic step forward. Senator Lummis fully supported the order, despite her original project not being selected, and expressed concern about the lack of support from Congress.
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