WASHINGTON (Reuters) -U.S. President Donald Trump has signed an executive order to establish a strategic reserve of cryptocurrencies by using tokens already owned by the government, disappointing some in the market who had hoped for a firm plan to buy new tokens.

The announcement, made on Thursday ahead of a meeting with crypto executives at the White House later on Friday, sent the price of bitcoin down by around 5% to $85,000. In early European trading on Friday, bitcoin has recovered to trade at $89,200.

A "Strategic Bitcoin Reserve" will be capitalized with bitcoin owned by the federal government that was seized as part of criminal or civil asset forfeiture proceedings, the White House crypto czar, billionaire David Sacks, said in a post on social media platform X.

The order kept open the possibility of the government buying bitcoin in future. The U.S. commerce and treasury secretaries "are authorized to develop budget-neutral strategies for acquiring additional bitcoin, provided that those strategies impose no incremental costs on American taxpayers," a factsheet on the White House website said.

"The significance of this executive order is mainly symbolic, as it marks the first time Bitcoin is formally recognized as a reserve asset of the United States government," said Andrew O'Neill, digital assets managing director at S&P Global Ratings.

"The reserve will only include Bitcoin already owned by the US government," O'Neill said, adding that "there is no indication yet of how much, if any, would be acquired nor a timeline."

Trump's promise of a strategic reserve and expectations for easier industry regulation had seen the token surge to an all-time high at $109,071.86 in January.

"This is the most underwhelming and disappointing outcome we could have expected for this week," Charles Edwards, founder of bitcoin-focused hedge fund Capriole Investments, wrote in a post on X.

"No active buying means this is just a fancy title for Bitcoin holdings that already existed with the Govt. This is a pig in lipstick."

Separately to the bitcoin reserve, there will also be a "U.S. Digital Asset Stockpile", consisting of tokens other than bitcoin, but the government will not add to the stockpile "beyond those obtained through forfeiture proceedings", Sacks said.

Trump this week named five digital assets he expected to include in a government reserve, spiking the market value of each. The five are bitcoin, ether, XRP, solana and cardano.

CRYPTO INDUSTRY SUPPORT

Attendees at Friday's White House crypto summit expect the event to serve as a stage for Trump to formally announce his plans.

It is not clear how such a reserve would work or how it would benefit taxpayers. Sacks said the federal government will have a strategy to maximize the value of its holdings in such a reserve, without offering details.

"The U.S. will not sell any bitcoin deposited into the Reserve. It will be kept as a store of value. The Reserve is like a digital Fort Knox for the cryptocurrency often called 'digital gold'," Sacks said.

Trump's moves to support the crypto industry, which spent millions of dollars backing him and other Republicans in the November elections, have drawn concern from some conservatives and crypto backers over giveaways to an already wealthy community and delegitimizing the digital currency industry.

Proponents argue that a reserve would help taxpayers benefit from crypto's price growth.

Sacks estimated the U.S. government owns about 200,000 bitcoin and the premature sale of the cryptocurrency has cost the American taxpayer $17 billion. It was not clear how Sacks arrived at these estimates. 

The president's support for the crypto industry has also sparked conflict-of-interest concerns. Trump's family has launched cryptocurrency meme coins, and the president also holds a stake in World Liberty Financial, a crypto platform.

His aides have said Trump has handed over control of his business ventures, which are being reviewed by outside ethics lawyers. 

(Reporting by Nandita Bose, Jasper Ward and Ismail Shakil; Additional reporting by Kevin Buckland and Elizabeth Howcroft; Editing by Leslie Adler, Michael Perry, Jacqueline Wong, Lincoln Feast and Sharon Singleton.)