Bessent's remarks about 'not buying Bitcoin' triggered selling pressure, causing prices to plummet from historical highs
US Treasury Secretary Scott Bessent's remarks during an interview on Fox Business on Thursday (8/14) instantly changed the landscape of the Bitcoin ($BTC) market. Bessent explicitly stated that the US government will not make additional purchases for the Bitcoin strategic reserve and will only use assets seized by law enforcement to establish the reserve.
He said: 'We have begun to enter the 21st century by establishing Bitcoin reserves. We will not purchase Bitcoin, but will use seized assets to continue building reserves. We will stop selling these assets.'
These remarks immediately triggered panic selling in the market. Bitcoin's price rapidly fell from the historical high of $124,457 set earlier on Thursday, dropping below the psychological support level of $117,250, a decrease of more than 4%. Ethereum also fell over 5% to below $4,500 during the same period, while the GMCI 30 index dropped 4% within about an hour, and the overall cryptocurrency market value briefly fell below $4 trillion.
Bessent estimates the current Bitcoin holdings of the US government are valued at approximately $15 billion to $20 billion. According to Arkham Intelligence data, the US government actually holds about 198,022 bitcoins, worth over 23.5 billion dollars, but about 94,643 bitcoins need to be returned to the victims of the hacking attack on Bitfinex exchange.
Image source: Arkham Intelligence The US government actually holds about 198,022 bitcoins, worth over 23.5 billion dollars
The abrupt policy shift has sparked controversy, with contradictory statements from White House officials raising questions
Bessent's statements sharply contrast with previous signals released by the Trump administration, raising questions about policy consistency in the market. When Trump signed the executive order to establish a Bitcoin strategic reserve in March, he instructed Bessent and Commerce Secretary Howard Lutnick to develop a 'budget-neutral' strategy to acquire additional bitcoins, provided it does not impose extra costs on American taxpayers.
David Sacks, White House AI and Cryptocurrency Director, previously told foreign media (Decrypt) that it is up to Bessent and Lutnick to decide whether to increase Bitcoin reserves through 'budget-neutral' methods, including selling gold and other government reserve assets. For months, White House officials have repeatedly reiterated their desire to 'acquire as much Bitcoin as possible.'
One of the most active advocates for purchasing Bitcoin among White House officials is former Executive Director of the Digital Assets Task Force, Bo Hines. Since March, Hines has repeatedly stated in public and private that the Trump administration aims to acquire as much Bitcoin as possible, and in April hinted that funding for Bitcoin acquisitions might come from tariff revenues. However, Hines announced his immediate departure this week, returning to the private sector.
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The Treasury Secretary urgently clarifies his stance, pledging to explore 'budget-neutral' acquisition channels
In the face of strong market rebound and industry skepticism, Bessent urgently clarified his position on the X platform later on Thursday, attempting to rectify the market chaos caused by his earlier remarks.
He stated: 'The bitcoins ultimately forfeited to the federal government will serve as the foundation for the Bitcoin strategic reserve established by President Trump’s March executive order. Additionally, the Treasury is committed to exploring budget-neutral approaches to acquire more bitcoins to expand the reserve and fulfill the President's promise to make America a 'global Bitcoin superpower.'
Image source: X/@SecScottBessent Bessent urgently clarified in a post that the Treasury is committed to acquiring more bitcoins to fulfill the promise of making America a 'global Bitcoin superpower'
The sudden turn of policy has left market participants confused. A widely circulated post on X claims that 'Washington cryptocurrency lobbyists are lying', questioning this initiative that represents Trump's biggest gesture of goodwill towards the cryptocurrency industry. Bitcoin's price did not rebound significantly after Bessent's corrective remarks; as of the time of writing, Bitcoin was at $118,901.
Senator Cynthia Lummis, a supporter of Bitcoin, posted on X that she supports Bessent's revised stance, stating: 'Building a budget-neutral Bitcoin strategic reserve is the right path.' She reiterated the proposal to fund Bitcoin reserves by reassessing gold reserves, saying, 'We can revalue the gold reserves at current prices and use the increased portion to establish reserves to save the nation from $37 trillion in debt.'
Image source: X/@SenLummis Cynthia Lummis posted in support of Bessent's remarks
Inflation data exacerbates the situation, as the cryptocurrency market faces a double blow
The market turmoil on Thursday was not solely due to Bessent's remarks; the US July Producer Price Index (PPI) data far exceeded expectations, exacerbating the situation. The PPI year-on-year growth rate reached 3.3%, higher than the expected 2.5% and the revised 2.4% for June, marking the highest annual increase since February. The month-on-month rate rose by 0.9%, the largest increase since June 2022.
Further Reading
US July PPI far exceeds expectations! Bitcoin plummeted to nearly $117,000 overnight, with over $1 billion in liquidations across the network
Stronger-than-expected inflation data reignited concerns about persistent inflation and tightening monetary policy, further suppressing risk assets including Bitcoin. Nevertheless, some analysts believe that the reality of the US debt exceeding $37 trillion may continue to drive long-term Bitcoin demand, and the decline on Thursday may not be enough to offset this fundamental driving factor.
The Trump administration's indecisiveness on cryptocurrency policy is highlighted once again. During the campaign, Trump initially proposed the concept of a Bitcoin reserve, later expanding its functionality to include other cryptocurrencies such as Ethereum ($ETH), Solana ($SOL), Ripple ($XRP), and Cardano ($ADA). Ultimately, Trump's executive order created an independent Bitcoin strategic reserve and a digital asset reserve that includes other cryptocurrencies.
'No more Bitcoin reserves? US Treasury Secretary's statement of not buying Bitcoin triggers selling pressure, followed by urgent clarification' This article was first published on 'Crypto City'
