US Bitcoin reserve prompts $370 million in ETF outflows: Farside

Bitcoin exchange-traded funds (ETFs) experienced significant turbulence on March 7, with nearly $370 million exiting the market as investor sentiment shifted following President Donald Trump’s announcement of a strategic Bitcoin reserve. Data from Farside Investors highlights these net outflows, indicating that institutional actors are adopting a cautious stance regarding Bitcoin (BTC) in response to Trump’s recent executive order.

The executive order, signed on March 6, aimed to establish a national Bitcoin reserve, a move that initially stirred optimism within the cryptocurrency community. However, it fell short of expectations as it did not mandate the government’s purchase of Bitcoin. This omission disheartened traders looking for strong governmental endorsement of Bitcoin. “While [Trump’s executive order] acknowledges crypto’s role in global finance, the lack of fresh purchases disappointed markets,” remarked Alvin Kan, COO of Bitget Wallet, in an interview with Cointelegraph.

The executive directive also outlined plans to create a digital asset stockpile to hold other cryptocurrencies, with both reserves initially comprising assets seized by law enforcement. Furthermore, it tasked officials with formulating budget-neutral strategies for acquiring additional Bitcoin, directly stating these acquisitions should not impose additional costs on taxpayers. This constrained scope prompted criticism from market analysts. Temujin Louie, CEO of Wanchain, articulated that the executive order’s limited approach led to considerable market disappointment: “This limited scope fell short of market expectations.”

Despite the initial letdown, some experts view the potential for future acquisitions positively. Bryan Armour, a director at Morningstar, suggested that the outlook could lead to additional participants entering the Bitcoin ecosystem if taxpayer concerns are adequately addressed.

Market reactions were immediate and pronounced. Bitcoin’s spot price saw a drop exceeding 2% on March 7, a sentiment mirrored in futures markets, which reflected declines across the board. Data from the CME, the largest U.S. derivatives exchange, confirmed this trend, indicating a broader retreat in Bitcoin’s forward curve, which consists of various futures contracts set to expire at staggered intervals.

Even without direct acquisition by the U.S. government, the establishment of a Strategic Bitcoin Reserve may have implications for international and institutional interest in Bitcoin. Ryan Rasmussen, head of research at Bitwise, stated, “Other countries will buy Bitcoin… [and] Financial institutions have no excuse” not to include BTC in their portfolios.

The abrupt sell-off in Bitcoin was labeled by some as a “buy the rumor, sell the news” scenario. Austin Arnold, co-founder of Altcoin Daily, suggested that while immediate reactions seem negative, the long-term outlook remains bullish.

In an ever-evolving landscape of cryptocurrency, President Trump’s strategic approach towards Bitcoin may unveil new avenues and discussions ahead as investors and institutions recalibrate their strategies based on these developments.