US President Donald Trump has recently signed an executive order to establish a strategic bitcoin reserve, using cryptocurrencies already owned by the US government. 

The executive order stipulates that the reserve will be capitalised with Bitcoin seized through criminal and civil asset forfeiture proceedings rather than fresh purchases. However, the order leaves open the possibility of future acquisitions, granting the US Commerce and Treasury Departments the authority to explore budget-neutral strategies for expanding the reserve, provided they do not impose additional costs on taxpayers.

The announcement prompted a volatile reaction in the cryptocurrency market, with Bitcoin initially dropping by 5% to $85,000 before recovering to $89,200 in early European trading. The digital asset had previously surged to an all-time high of $109,071 in January, fuelled by expectations of industry-friendly policies under the Trump administration.

David Sacks, the White House's cryptocurrency policy lead, described the reserve as a "digital Fort Knox", ensuring the U.S. government retains its holdings as a long-term store of value. He stated that Bitcoin deposited into the reserve will not be sold, though no details were provided on how the assets would be managed or leveraged. 

Sacks estimated that the government currently owns around 200,000 Bitcoin, claiming that premature sales of its holdings have cost taxpayers $17 billion. However, the methodology behind these estimates remains unclear, according to a recent report by Reuters.

Alongside the Bitcoin reserve, the administration has also announced plans for a U.S. Digital Asset Stockpile. Earlier this week, Trump announced that he expects 5 cryptocurrencies - bitcoin, ether, XRP, solana, and cardano in the government reserve, increasing market value for each of the digital assets.

The announcement comes amid increasing political and financial entanglements between the Trump administration and the cryptocurrency industry. Trump's pro-crypto stance has earned him significant support from digital asset firms, which have invested heavily in his 2024 re-election campaign and other Republican candidates.