Bitcoin experienced a shift on Monday, retracing its early gains triggered by U.S. President Donald Trump's proposal over the weekend for a national reserve of cryptocurrencies.
Initially optimistic following Trump's comments on Truth Social, market sentiment turned cautious as investors awaited further details about this cryptocurrency initiative.
The world's leading cryptocurrency, bitcoin, increased by 2.4% from Friday to $86,292 but still decreased by 8% from Sunday.
In his recent statement, Trump outlined his strategy to stockpile various cryptocurrencies, including bitcoin, Ether, XRP, Solana, and Cardano, the latter two being newly disclosed. Trump highlighted bitcoin and Ether as the key components of this reserve, triggering a 20% surge in bitcoin value from its November low. However, the token’s value has been decreasing since mid-January due to unmet expectations regarding regulatory changes.
After Trump's announcement, Ether dropped by 4.3% from Friday to $2,127.10, plummeting nearly 16% from Sunday levels. XRP declined by more than 15% to $2.48 from Sunday but surged by 25% compared to Friday. Solana also saw a 16% decline from Sunday to $148.89 while gaining 1.6% from Friday. Cardano fell by 19% from Sunday to $0.8940, decreasing by 3% compared to Friday.
The response to the proposed strategic crypto reserve was mixed, with some prominent figures expressing skepticism. Anthony Pompliano, CEO of Professional Capital Management, criticized the decision, labeling it as an “unforced error” that will benefit the creators of these coins at the cost of U.S. taxpayers.
Despite concerns raised by key figures like Pompliano and the Winklevoss brothers, the promise of a strategic reserve has injected enthusiasm into the crypto industry, which has recently struggled.
Bitcoin faced a significant setback in February, dropping by over 17%, marking its most substantial monthly decline since June 2022. Moreover, it has lost more than a third of its value since surpassing $105,000 in early January.
The currency's rally post-Trump's election had been underpinned by hopes that he would support a strategic bitcoin fund and oppose President Biden's restrictive measures.
Kathleen Brooks, research director at XTB, noted the irony of bitcoin now being dependent on the U.S. government for its fate while emphasizing that hitting $100,000 remains a key target for the cryptocurrency.
Although Trump's announcement stirred market reaction, no concrete actions have been taken to advance this policy, prompting concerns among investors. Analysts have raised questions about the funding sources for the proposed reserve, which could involve using taxpayer money or cryptocurrencies seized in law enforcement activities, the latter viewed as less bullish due to its limited impact on market dynamics.