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Bitcoin suffered a sharp sell-off Thursday after U.S. Treasury Secretary Scott Bessent announced the government would stop purchasing cryptocurrencies for its strategic reserve, sending shockwaves through the market.
Bitcoin Drops From All-Time High
The flagship cryptocurrency plunged from a record $124,517 to an intraday low of $117,719 on Bitstamp before recovering slightly to around $118,500. The nearly 4% drop in just hours underscores the extreme volatility triggered by political announcements.
Bessent’s statement abruptly ended weeks of speculation that the U.S. government might continue buying Bitcoin, a narrative that had fueled bullish momentum. The reaction was swift: over $1 billion in crypto positions were liquidated within 24 hours, including $778 million in long positions.
Altcoins suffered even more, with XRP plunging 7% in minutes and briefly falling below the $3 mark.
Strategic Reserve Hopes Crushed
Until now, the administration had maintained an ambiguous stance on expanding the strategic Bitcoin reserve, leaving room for speculation. However, Bessent’s clear rejection closed that door.
The U.S. strategic reserve consists entirely of confiscated cryptocurrencies, with no dedicated budget for fresh acquisitions. This means the government’s Bitcoin holdings will remain static, with no new inflows.
On Polymarket, betting odds on the U.S. establishing an expanded Bitcoin reserve by 2025 plunged to 16%, a historic low, reflecting a sharp decline in investor confidence in further government involvement.
TREASURY SECRETARY SCOTT BESSENT SAYS THE U.S. WILL **NOT** BE BUYING ANY BITCOIN
THEY WILL HOLD THE $15-$20 BILLION IN BITCOIN THEY ALREADY HAVE AND CONFISCATE MORE
WEIRD, BECAUSE I WAS PROMISED A STRATEGIC BITCOIN RESERVE
MAKES SENSE WHY BO HINES RESIGNED NOW, EH? pic.twitter.com/MGu90xOBqZ
— Walker⚡️ (@WalkerAmerica) August 14, 2025
$20 Billion in Government Crypto Holdings
Bessent disclosed that U.S. government crypto assets, primarily from seizures, are valued at $20 billion, making the country the largest state-level Bitcoin holder in the world.
While China and the UK also hold significant Bitcoin reserves, strategies differ: China is reportedly considering selling part of its holdings to address budget deficits — a stark contrast to the U.S. “hold-only” approach.
A Turning Point for Investors
This announcement signals the end of an era where Bitcoin’s rally was buoyed by expectations of government-backed demand. In a single day, sentiment shifted from euphoria to uncertainty.
Traders now face the challenge of recalibrating their strategies, focusing on private institutional adoption, technological innovation, and favorable regulation as potential growth drivers.
The massive liquidations serve as a reminder that political reversals can erase billions in market value within hours, making caution the new norm.
Although the U.S. strategic reserve still symbolizes America’s intention to maintain influence in the crypto space, its passive stance leaves the market without a key bullish catalyst.
