Crypto Market Cap Plunges 12% as Trump’s Reserve Plan Faces Uncertainty

The cryptocurrency market faced a sharp downturn on Tuesday, wiping out the gains spurred by President Donald Trump’s weekend announcement of a U.S. strategic crypto reserve.

Optimism over the proposal quickly faded as investors reassessed its feasibility, leading to widespread sell-offs and over $1 billion in liquidations.

Market Wipeout Worsens as Sentiment Shifts

The total cryptocurrency market capitalization tumbled by 12.3% to $2.85 trillion, marking one of the most significant single-day losses in recent months. Bitcoin, which initially surged following Trump’s announcement, fell 9.8% to $83,694. Ethereum plummeted 14.8% to $2,083, while XRP saw a steep 17.7% decline, settling at $2.30. Other major altcoins, including Solana and Cardano, suffered losses exceeding 20%.

The Ripple (XRP) price declined 13.64% in the last 24 hours at press time. Source: XRP Liquid Index (XRLX) via Brave New Coin

The sudden sell-off triggered a wave of liquidations, with CoinGlass data revealing that over 311,000 traders were affected. Total liquidations amounted to $1.08 billion, with Bitcoin accounting for $398.49 million, Ethereum $209.73 million, Solana $70.49 million, XRP $62.89 million, and Cardano $44.15 million.

Trump’s Reserve Plan Sparks Debate

Trump’s proposal for a strategic cryptocurrency reserve was initially met with enthusiasm, particularly among Bitcoin and Ethereum supporters. His Truth Social post revealed that the reserve would include Bitcoin, Ethereum, XRP, Solana, and Cardano. While Bitcoin and Ethereum were positioned as the foundation of the reserve, the inclusion of altcoins raised concerns about the plan’s legitimacy and long-term viability.

10x Research argues that Fed policy outweighs Trump’s crypto stance for Bitcoin’s price action. Source: 10X Research via X

Analysts at 10X Research suggested that the market overreacted to Trump’s post, cautioning that legislative approval could take months. “Rather than a genuine push for regulatory clarity, this rally appears to have been an opportunity for profit-taking,” they noted.

Industry Leaders Express Skepticism

Several prominent figures in the crypto industry voiced concerns over Trump’s plan. Anthony Pompliano, founder of Professional Capital Management, criticized the initiative in a letter to investors. “Even though Solana is our second-largest crypto position, this decision on a broad strategic reserve is an unforced error that could ultimately harm taxpayers,” he wrote.

Bitcoin is the only digital asset fit for a Strategic reserve, meeting the gold-like standard of hard money. Source: Tyler Winklevoss via X

The Winklevoss twins, co-founders of Gemini, also cast doubt on the reserve’s structure. “Only Bitcoin meets the necessary criteria as a reserve asset,” they stated on X, suggesting that the inclusion of altcoins added unnecessary risk.

Peter Schiff, a long-time Bitcoin critic, went even further, calling the proposal “the biggest crypto rug pull of all time.” He urged Congress to investigate whether Trump’s associates or donors benefited financially from the announcement.

Bitcoin Faces Its Worst February in a Decade

The recent downturn adds to Bitcoin’s struggles, with February closing as one of its worst-performing months in history. Bitfinex analysts logged a 17.39% loss for Bitcoin, its steepest February drop since 2014. The decline, which saw Bitcoin fall 28.3% from its January high of $109,590, has been added to by massive withdrawals from Bitcoin ETFs, which amounted to $1.1 billion on February 25.

Bitcoin (BTC) price dropped 8.4% to $83,602 in the last 24 hours at press time. Source: Bitcoin Liquid Index (BLX) via Brave New Coin

Historical data shows that Bitcoin generally performed well during February, with an average increase of 13.12% since 2013. The fall this year is the largest post-halving February drop ever, and it has investors concerned about the short-term trajectory of the asset.

Road to Recovery Hinges on Institutional Interest

Bitcoin and the broader crypto market must get over the obstacle of recovering bullish momentum. Market analysts said that will depend on macroeconomic drivers, institutional appetite, and regulatory certainty. “A recovery in strength will require significant buying pressure,” said one Bitfinex strategist, and noted sentiment is still brittle.

The uncertainty surrounding Trump’s crypto reserve proposal has only added to market volatility. Until clearer regulatory directives emerge, traders may continue to tread cautiously, waiting for definitive policy actions before re-entering the market in force.