Key Takeaways:
- Bitcoin experienced a sharp decline to $100,000. This followed Federal Reserve Chair Jerome Powell's statement.
- Powell confirmed the Fed is not permitted to hold Bitcoin. He also said they are not seeking to change that.
- President-elect Donald Trump's proposal for a Strategic Bitcoin Reserve contrasts with the Fed's stance.
- Bitcoin's price drop reflects market sensitivity to regulatory news and central bank policies.
Bitcoin's price plummeted to $100,000 following a significant statement from Federal Reserve Chair Jerome Powell. Powell clarified that the Federal Reserve is prohibited from holding Bitcoin. "We're not allowed to own bitcoin," Powell stated during a press conference.
He emphasized that the Fed has no intention of seeking legal changes to alter this. This comes as a response to President-elect Donald Trump's proposal for a Strategic Bitcoin Reserve, which suggested using seized assets to fund it. Powell says Fed cannot hold bitcoin, not seeking to change ... from The Economic Times highlights this contrast.
The digital currency had recently seen a surge, partly due to Trump's pro-crypto stance. After Powell's remarks, Bitcoin's value dipped, underscoring the market's sensitivity to regulatory news. For more on how regulatory news affects Bitcoin, see Bitcoin Surges to New All-Time High of $106,000 Amid Market Buzz.
The Federal Reserve Act restricts the central bank from holding government bonds or highly speculative assets. Despite expanding asset purchases during economic crises, Bitcoin remains outside the Fed's purview. Powell has previously described Bitcoin as a speculative asset, more akin to gold than the US dollar. Jerome Powell Says Fed Has Little to Do With Bitcoin ... from Cryptonews elaborates on this view.
Bitcoin's volatility has been a key factor in its classification as a speculative asset. This volatility reduces its utility as a store of value or a unit of exchange. To understand Bitcoin's growth and volatility, read How Much Has Bitcoin Grown Since Its Launch? A Look at Its Journey to 2025.
The market's reaction to Powell's statement also impacted other cryptocurrencies. Altcoins like XRP, Cardano's ADA, and Litecoin's LTC saw declines of around 10% in the past 24 hours. This broader market impact shows the interconnected nature of the crypto market. Bitcoin recently hit a milestone of $100,000, detailed in Bitcoin Breaks $100K: What This Milestone Means for Investors.
Powell's reiteration of the Fed's position is not new, but it gains significance against the backdrop of Trump's plans. The potential creation of a U.S.-managed Bitcoin reserve could raise questions about the dollar's strength. As the market navigates these developments, investors should stay informed about regulatory changes and central bank policies.