Bitcoin took a nosedive on Thursday after the US Treasury Secretary, Scott Bessent, announced the government won’t be buying any more Bitcoin for its reserves.
The Plunge
The price had soared to almost $124,120 earlier in the day, but quickly dropped to around $118,550 after Bessent’s statement. This caused a flurry of activity, with some crypto futures traders getting forced out of their positions (liquidations) as prices plummeted. Reports estimated around $450 million in liquidations during this period. One report showed Bitcoin falling from roughly $121,050 to $117,201 in just an hour.
Bessent’s Announcement
Bessent, in an interview with Fox Business, explicitly stated that the government “is not going to be buying” more Bitcoin. He clarified that future additions to the Bitcoin reserve would only come from assets seized by law enforcement. He estimated the current value of the government’s Bitcoin holdings to be between $15 billion and $20 billion. This announcement directly contradicted an earlier executive order from President Trump pushing for increased Bitcoin holdings.
Market Reaction and the Bigger Picture
The market reacted swiftly to this news. Investors had previously factored in the possibility of the government buying more Bitcoin, leading to increased optimism. Bessent’s statement removed that expectation, leading to the sharp sell-off.
The timing of Bessent’s comments was also significant. July’s tariff revenue hit almost $30 billion, potentially exceeding previous annual projections of $300 billion. Bessent hinted that this increased revenue could be used to fund other asset strategies. This news came alongside a report showing the Producer Price Index increasing, adding to the overall economic uncertainty investors are grappling with.
Confiscated Assets: A Slower Approach
Bessent’s emphasis on using confiscated assets changes the game. Instead of direct government purchases, the growth of the Bitcoin reserve will now depend on law enforcement seizures. This means slower, less predictable growth, removing a major, consistent buyer from the market. This lack of predictability can lead to more dramatic price swings, as seen on Thursday.
