Trump's Strategic Bitcoin Reserve a 'watershed moment' despite recession fears, K33 analysts say

The potential U.S. Strategic Bitcoin Reserve is still a "big deal" and not a "nothing burger," despite the perception of President Trump's recent executive order being "ruined" by returning recession fears, according to K33.

Relentless selling and de-risking in crypto and equity markets has continued to hit prices this week, with bitcoin reaching new yearly lows of around $76,555 and ether $1,775 on Tuesday — its lowest point since November 2023. ETH continues to outperform to the downside, with the ETHBTC ratio reaching its lowest level since December 2020, K33 Head of Research Vetle Lunde and Senior Analyst David Zimmerman noted in a Tuesday report.

Meanwhile, the GMCI 30 index, representing a selection of the top 30 cryptocurrencies, is down 26% year-to-date at 134.92.

The analysts noted that Trump seems indifferent about recession risk, determined to lower U.S. 10-year yields to help the government manage its refinancing needs. Combined with the uncertainty of the President's back-and-forth tariff announcements, both the SP 500 and Nasdaq have hit lows not seen since mid-September.

However, bitcoin has remained positive since the presidential election with around 13% gains, outperforming the negative Nasdaq and SP returns in the same period. Lunde and Zimmerman said this is justified as Trump has delivered on his crypto promises by first establishing a crypto working group and then announcing a U.S. Strategic Bitcoin Reserve last week.

"We fundamentally disagree with pundits attributing the recent selloff to an underwhelming U.S. reserve," the analysts wrote. "This reserve is a watershed moment for Bitcoin. This is a huge leap forward in legitimizing BTC as a global store of value and is a massive disconnect from its recent performance driven by other market forces. While global market uncertainties may need time to be resolved, we perceive current price levels and the period ahead as a solid opportunity."

Bitcoin acquisition strategy expected by May

President Trump signed an executive order on March 6 to create a U.S. Strategic Bitcoin Reserve, established from the approximate 200,000 BTC ($17 billion) already owned by the federal government that was forfeited as part of criminal or civil proceedings, minus those that still need to be returned to victims of crime.

Therefore, the bitcoin reserve is expected to hold approximately 103,500 BTC at its launch, with 94,636 BTC seized from the Bitfinex hackers likely to be returned to the crypto exchange shortly, the analysts said. 

Additionally, Trump directed Treasury Secretary Scott Bessent and Commerce Secretary Howard Lutnick to develop budget-neutral strategies for acquiring additional bitcoin, provided they have no incremental costs to American taxpayers.

The executive order also established a U.S. Digital Asset Stockpile consisting of cryptocurrencies other than bitcoin. However, the government will not acquire additional assets for the stockpile beyond those obtained through forfeiture proceedings.

While information on budget-neutral acquisition measures for the bitcoin reserve has been vague, the K33 analysts expect some clarity by May 5, with Bessent set to deliver an evaluation of legal and investment considerations within 60 days of the executive order. Potential budget-neutral strategies include U.S. Treasury Exchange Stabilization Fund surpluses, selling special drawing rights issued by the IMF or a gold certificate revaluation, they noted.

"The most influential global superpower has just flagged an end to seized bitcoin sales; neither current nor future seized assets will be sold," the analysts said. "Further, it’s exploring strategies to acquire more. This could set an example for other nations while marking a new era for bitcoin. Thus, we believe the current environment is favorable for accumulating long-term exposure as short-term uncertainties materialize and get fully digested in the market."

Sen. Cynthia Lummis reintroduced a bill to create a bitcoin reserve on Tuesday.