On Thursday, President Donald Trump signed an executive order authorizing the creation of a strategic bitcoin reserve. The reserve will hold bitcoin obtained by the US government through criminal or civil asset forfeiture proceedings.Â
According to billionaire David Sacks, the White House "crypto czar," the estimated 200,000 bitcoin the US government currently has will be moved to the reserve.
In a message on social media platform X, Sacks likened the digital store to the gold reserves of Fort Knox. He also said that the 195,000 of bitcoin sold by the government previously amounted to "over $17 billion in lost value."Â
It's worth noting that, as a self-proclaimed prolific crypto investor, Sacks -- along with his friends and family -- stands to potentially benefit more than most from this executive order. Sacks confirmed he's liquidated his crypto holdings prior to joining the Trump administration, but there are some concerns about other potential conflicts of interest.
A community note on his post pointed out he could have significant indirect holdings through Bitwise Asset Management. Sacks refuted the claim, stating he exited his position with the exchange-traded fund on Jan. 22.
Bitcoin isn't the only digital currency the government plans to stockpile. The executive order also established a separate US digital currency stockpile, which includes solana, ethereum, XRP and cardano. Additionally, the order calls for a full audit of the government's held digital assets.
If you hold digital currency, or are considering investing, we'll explain how this could potentially affect its value going forward.
Why is Trump creating a bitcoin reserve?
It's part of the president's efforts to make the US the "crypto capital of the world." On the campaign trail, Trump promised to create a bitcoin reserve to store value. A reserve is held until it is needed, such as during economic turmoil or to pay off certain debts. The bitcoin in the reserve is owned by the Department of Treasury, which will add to it with any seized digital assets.
"The government will not acquire additional assets for the Stockpile beyond those obtained through forfeiture proceedings," Sacks wrote. However, the Commerce and Treasury departments are "authorized to develop budget-neutral strategies for acquiring additional bitcoin, provided that those strategies have no incremental costs on American taxpayers."
The US's gold reserves, for example, help to stabilize the dollar and support the world economy, while offering a guarantee against debts, hedging against inflation and providing a store of value.
However, gold has a much more stable value than bitcoin, which experiences considerable swings in price. Bitcoin crossed the $100,000 mark in early December, but remains volatile. It reached $90,451 yesterday but has since dropped to $86,970.
What is the US Digital Currency Stockpile?
In addition to the bitcoin reserve, the executive order also creates a US Digital Currency Stockpile. This is a separate reserve used for holding assets other than bitcoin. Like the bitcoin reserve, the stockpile will grow as digital assets other than bitcoin are seized by the government.
Does this mean I should invest in crypto now?
Although the announcements showcase the government's interest in cryptocurrency, this measure won't make investing in cryptocurrency any less risky, for now.Â
Crypto is inherently risky and often experiences price swings, but there's no denying it has increased in value over the years. In December 2022, bitcoin was valued at around $17,000. Now, it's at nearly $90,000. The crypto market will likely experience more swings in the coming months, depending on how the current administration backs crypto or pushes for legislation.Â
There's no guarantee when it comes to investing in crypto. In the end, it comes down to your own investment strategy, how diversified you'd like your portfolio to be and how comfortable you are with volatility.
