America has the most crypto-friendly president ever. Donald Trump has created a bitcoin reserve for the government. He has released crypto criminals. Americans can now include crypto in their pensions. And he halted Biden’s strict crypto policy. If bitcoin cannot rise now, when can it?
The crypto world has always needed a new story to keep the price high. First it was about freedom from banks. Then about protection against currency debasement. Then about large companies that would jump in. And now about support from the president. But every story only worked for a while. Bitcoin does not generate money, like a company does. There are no profits and no dividends. Its value depends solely on the next buyer who is willing to pay more. That is called the “greater fool” principle. And it appears that there are fewer and fewer buyers. The selling pressure did not come from regulators or hackers, but from investors themselves. They simply decided that it had been enough.
Big expectations
A year ago, things looked good for bitcoin. Trump called himself the best friend of crypto. Everyone thought bitcoin would quickly go to 200,000 dollar. The digital gold would change everything. But that did not happen. The price has fallen 45 percent since the peak in October. Bitcoin is now even cheaper than on the day Trump won the election. The meme coins that Trump himself created have lost 95 percent of their value.
Meanwhile, gold rose by more than 60 percent. Gold did exactly what bitcoin was supposed to do: protect in uncertain times. Bitcoin was called “digital gold,” but it moves in exactly the opposite direction from real gold. That is bad for bitcoin’s image.
Billions in losses
Trump created a bitcoin reserve for the American government. When he did so in March last year, the government owned about 200,000 bitcoins. They were worth 18.5 billion dollar at the time. Now that reserve is worth almost 5 billion dollar less. Bitcoins that police seized in October in a fraud case were worth 14 billion at the time. Now only 8.8 billion. In total, the American government now owns about 328,000 bitcoins worth 23 billion dollar.
The White House said that price fluctuations are part of it. Treasury Secretary Scott Bessent defended the reserve by pointing to bitcoins that were obtained years ago for 500 million dollar and are now worth 15 billion. But taxpayers are now mainly looking at losses.
The company Strategy also has major problems. It bought a large amount of bitcoins, more than 713,000 units—almost 4 percent of all bitcoins that exist. The average purchase price was 76,000 dollar per coin. But the price of bitcoin has now fallen below that, to about 70,000 dollar. Strategy’s share price has lost roughly three quarters of its market value since October.
Michael Burry called bitcoin “pure gambling.” He warned that if bitcoin falls another 10 percent, Strategy will suffer more than 4 billion dollar in losses. In that case, the company will probably no longer be able to raise new money from investors.
Bitcoin is not real money
Real money must be able to do three things. You must be able to compare prices with it. You must be able to pay with it easily. And it must retain its value. Bitcoin struggles to fulfil any of these three functions.. The price fluctuates too much to use it for payments. Nobody wants to pay with something that could be worth half as much tomorrow. And in times of crisis, bitcoin does not protect you. That has been proven several times in the seventeen years that bitcoin has existed.
The bitcoin ETFs are also a growing problem. These investment funds made it easy for ordinary people to buy bitcoin. They raised almost 60 billion dollar since early 2024. But most investors bought bitcoin at an average of 83,000 dollar. They are therefore now facing substantial losses, on average about 18 to 23 percent. Last week, investors collectively pulled one billion dollar out of these funds. In total, there is still about 101 billion dollar in them. But if more people withdraw their money, the price could fall even further. That would then be the mirror image of last year, when inflows of money pushed the price up instead.
What now?
Is this the end of bitcoin? That is hard to say. The price could rise again tomorrow. But the big picture is clear. Bitcoin has no foundation. There are no profits, no revenues, no real economic value. There is only the hope that someone else will be willing to pay more tomorrow. The American government is losing billions. Large companies are in trouble. Ordinary investors have losses. The grand bitcoin story is losing more and more followers. And for something that relies solely on belief, that is the worst possible news.
Han Dieperink is chief investment officer at Auréus Vermogensbeheer. Earlier in his career, he was chief investment officer at Rabobank and Schretlen & Co.