Bitcoin's Dramatic Plunge: US Treasury's Stance Sends Shockwaves
By: Isha Das
Bitcoin's market witnessed a significant downturn as news surfaced that the US government will abstain from purchasing more Bitcoin to augment its digital asset reserve. This announcement came directly from US Treasury Secretary Scott Bessent during an interview with Fox Business.
On Thursday, Bitcoin plummeted below the $119,000 mark, closing at approximately $118,730 after reaching an unprecedented peak of $124,457 earlier the same day. This dip is attributed to Bessent’s confirmation that the US government has no intentions to increase its Bitcoin holdings through direct new purchases.
The policy shift comes amid speculation and previous governmental discussions suggesting the addition of Bitcoin to federal reserves. Critics argue that such a purchase could have positioned the US as a significant player in the crypto space. However, Bessent's definitive “no buy” stance shifted the market sentiment dramatically, eroding earlier gains and placing traders on high alert.
The Treasury Secretary stated that instead of purchasing Bitcoin, the US would rely on confiscated assets to bolster its reserves. Bessent estimated the value of current Bitcoin holdings to be between $15 billion and $20 billion. Analysts believe this move diverts from the previous executive orders that considered budget-neutral approaches to increase Bitcoin reserves, emphasizing reliance on seized assets.
The market response was swift and severe. The sharp sell-off erased a considerable portion of Bitcoin’s earlier gains, while crypto futures platforms recorded liquidations totaling an estimated $450 million. According to market experts, the abrupt policy clarity removed the potential for a government-backed price support, causing volatility as traders adjusted to the absence of a predictable buying force.
Simultaneously, Bessent reported that rising tariff revenues, which surpassed $30 billion in July, potentially skew the balance sheet plans toward more traditional assets rather than Bitcoin. July's economic indicators, such as the Producer Price Index's year-on-year rise, compound the fiscal backdrop against which these statements were made, suggesting a pivot to broader economic strategies over digital currencies.
This development underscores the intricate dance between governmental fiscal policy and cryptocurrency market movements, highlighting how significant policy declarations can ripple through the digital asset ecosystem, impacting investor sentiment, trading volatility, and market stability.
