The US Treasury Secretary, Scott Bessent, announced that the United States will not buy cryptocurrency for its reserves. Instead, any involvement in the crypto market will come from using seized assets. Following this update, bitcoin prices dipped slightly, showing a decrease in expected demand. The cryptocurrency market often follows credit cycles like stocks, suggesting this change may not heavily affect the overall market.

Impact on Positive Market Sentiment

The Treasury’s decision to avoid cryptocurrency purchases removes a significant potential buyer from the market. This reduces the positive sentiment that was building around government adoption. Bitcoin reacted quickly, falling about 3% to nearly $82,000 just hours after the news broke. This uncertainty has led to a rise in implied volatility for bitcoin options, which had been declining since July 2025. Traders should expect higher short-term option prices as the market adjusts to this news. For those bracing for more unpredictable price movements, purchasing straddles might be a good, though expensive, strategy. Overall, the news appears bearish, and the derivatives market reflects this. The bitcoin put-to-call ratio on major exchanges has risen to 0.85, its highest level in three months. This indicates that traders are increasingly buying puts for protection, anticipating potential downsides or limiting any short-term rallies.

Using Seized Assets in the Market

The plan to use confiscated assets implies the government will be a seller, not a buyer. We observed this in 2023 and 2024 when seized Silk Road bitcoins were sold, creating temporary price pressure. Traders must now keep an eye on government wallets and auction announcements as these will indicate new supply entering the market. It’s crucial to remember that crypto markets are closely linked to overall credit cycles, similar to tech stocks. With the latest CPI numbers from July 2025 at a persistent 2.9%, the Federal Reserve is unlikely to loosen monetary policy anytime soon. This macroeconomic challenge, paired with the Treasury’s announcement, creates a tough environment for risk assets. Looking back, this situation is reminiscent of central bank gold sales in the late 1990s, which capped gold prices for several years. The loss of a major sovereign buyer is a critical long-term issue. Thus, strategies that benefit from steady price movements or gradual declines, like writing covered calls against existing holdings, should be explored. Create your live VT Markets account and start trading now.

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