Bitcoin dropped in value only hours after reaching a record high. The fall came after higher than expected inflation numbers and a statement from Treasury Secretary Scott Bessent, who said the U.S. will not buy Bitcoin for its strategic reserve.
On 14 Aug 25, Bitcoin dropped 4.8% to $117,387. Just the night before, it had climbed to a record $124,210 right after the S&P 500 also closed at an all time high.The sudden reversal in momentum was linked to two big developments : one from economic data and another from government policy.
Inflation Data Shock
The first trigger came from the Producer Price Index (PPI) report released by the U.S. Bureau of Labor Statistics. According to the report, wholesale prices rose 0.9% in July compared to June. This was three times higher than economists had predicted, who were expecting a rise of just 0.3%.Because of this sharp monthly increase, the annual wholesale inflation rate jumped to 3.3%, up from 2.4% in June. For traders and investors, this was a worrying sign because it suggested that inflationary pressures are still strong in the U.S. economy.For months, financial markets had been building a story that inflation was stabilising, and that the U.S. Federal Reserve might start cutting interest rates soon. However, shook that belief. If inflation remains high, the Fed may have to delay or reduce the scale of rate cuts. This disappointed investors and triggered risk-off sentiment, leading to a selloff in assets like Bitcoin.
Treasury Secretary’s Statement
The second blow to Bitcoin came from Secretary Scott Bessent’s remarks. Speaking with Maria on Fox Business, Bessent said that the U.S. government would not be purchasing Bitcoin to add to its strategic reserve.He explained, “We’ve also started to get into the 21st century, a Bitcoin reserve. We’re not going to be buying that, but we are going to use confiscated assets and continue to build that up.”With this, he confirmed earlier signals that while the U.S. is serious about recognising digital assets, it does not plan to spend taxpayer money on buying Bitcoin directly. Instead, it will rely on Bitcoin seized in criminal investigations to grow its holdings.Bessent also repeated a statement he had made in March, saying that the government would no longer sell the Bitcoin it has collected from criminal cases. This shift means that seized digital assets will now become a permanent part of U.S. reserves rather than being auctioned off.
Trump’s Pro Crypto Policies
Bitcoin’s rally earlier this year was partly fuelled by the policies of President Donald Trump, who returned to the White House in 2024 with promises of a crypto-friendly approach.In March, Trump signed an executive order creating a strategic Bitcoin reserve. Under this plan, the reserve would be built using digital assets seized by U.S. authorities from criminal activities such as hacking or illegal trading. The aim was to ensure that the government held a solid base of digital assets without actually buying them from the open market.Trump’s administration also introduced another executive order recently that allows 401(k) retirement accounts to invest not just in traditional stocks and bonds, but also in cryptocurrency, private equity, real estate, and other alternative assets. This was seen as a bold step towards opening up more investment channels for ordinary Americans and giving cryptocurrencies greater legitimacy.
The GENIUS Act and Stablecoins
In July, the U.S. Congress passed the GENIUS Act, a bipartisan law that created the country’s first federal framework for stablecoins. According to the Act, any stablecoin issued in the U.S. must be fully backed by reliable assets, ensuring that people can trust their value.This was an important milestone for the digital finance industry because it cleared a lot of regulatory uncertainty around programmable money and tokenised systems. For investors, the law gave confidence that the U.S. is moving towards building a safe and legal foundation for cryptocurrencies and related innovations.
Government’s Current Bitcoin Holdings
During his Thursday interview, Bessent also mentioned the size of the U.S. government’s existing Bitcoin holdings. At current market prices, he estimated that the value was between $15 billion and $20 billion.This figure was slightly lower than some third-party estimates, which put the government’s stash closer to $24 billion. Regardless of the exact amount, the numbers confirm that the U.S. already has a large exposure to Bitcoin, even without actively buying it.
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