The value of Bitcoin dropped 6% within 24 hours and dipped below $100,000 to trade at $99,047 during Wednesday trading following the sentiments of US Federal Reserve Chair Jerome Powell rejecting the US BTC reserve plan.
The impact of the statement attributed to Jerome Powell was felt across the market, with major altcoins also recording significant losses. According to data from Coinglass Data, the flagship cryptocurrency went as low as $96,000 at the time of writing. Crypto derivatives registered over $1.2 billion in liquidation during the last 24 hours.
Bitcoin’s Drop Affected the Altcoin Market
The price correction following Jerome’s rejection of the US BTC reserve plan spread over to the altcoin market, with the entire crypto market cap falling 9% to at least $3.63 trillion. The king of Altcoins, Ethereum, lost 10% of its value to trade at $3,372, while Solana registered an identical crash to reach a low of $187. Chainlink and Dogecoin were the greatest casualties among the 20 leading cryptocurrencies by market cap by losing 17.3% and 18% corrections respectively.
Jerome Powell doesn’t agree with the idea of proposing the US BTC reserve plan. He believes the US central bank was “not looking for a low change,” adding that currently, there is no law that would allow it to hold Bitcoin. Most experts believe these sentiments were responsible for the sharp correction that saw Bitcoin fall from its latest all-time high of $108,000, achieved earlier this week.
Jerome Powell’s Statement on the FED Reserve is also an Issue.
Bitcoin’s latest rally, which saw it achieve a six-figure level, was fuelled by US President-elect Donald Trump’s proposal for a US BTC reserve plan. A number of states, including Florida and Texas, have already backed the plan to create state-backed Bitcoin reserves, which further boosted the digital market’s optimism. Despite the setback, other experts believe that Jerome Powell’s statement was just one piece of the puzzle.
The other piece of the puzzle, experts state, surrounds the United States Federal Reserve’s announcement of a third consecutive rate cut of 25 basis points. However, unlike the other such occasions in the past few months, the cryptocurrency market reacted negatively and went south this time round. Analysts argue that the reason could be the choice of words used by Jerome Powell, who hinted that the central bank could halt the current policy of reducing interest rates as a result of the disappointing CPI data from October and November. Jerome stated that “Today was a closer call but we decided it was the right call.”
Is There a Silver Lining?
Despite the dark cloud hovering over following the reactions attributed to statements by FED Chair Jerome Powell, some players within the cryptocurrency space believe their still a silver lining. Former BitMEX CEO Arthur Hayes, who is currently CIO at Maelstrom, recently stated he anticipated a significant fall-off within the crypto market as we near Trump’s January inauguration. According to Hayes, the investors will have to face the reality that Trump will have to enact policy changes on or around the January 20th date for his pledges to trigger their expectations.
Conclusion
After breaking the $108,000 mark Wednesday, Bitcoin once again fell below the $100,000 mark and brought the entire crypto market down thanks to pressure from the equity market. The statement by Jerome Powell on the US BTC Reserve plan may be partially responsible for the sharp reaction, without forgetting his sentiments on the future of FED reserve cuts. Crypto Enthusiasts still believe that the inauguration of crypto President Donald Trump on January 20, 2025, will steer the enactment of a clean regulatory environment that will encourage growth within the digital asset space.
Frequently Asked Questions (FAQs)
What would be the benefits of a strategic Bitcoin reserve?
A Strategic bitcoin reserve could hedge against inflation, strengthen the economy, and diversify the government’s holdings.
Does the US own any Bitcoins?
It’s possible that the US government already owns some BTC. The strategic Bitcoin reserve could initially be established from the 200,000 BTC that the federal government has seized in the past from criminal operations.
How would a Bitcoin strategic reserve work?
Some analysts believe that the program would help to halve the national debt over 20 years without a taxpayer burden if the price of BTC continues to appreciate over time.
What are some criticisms of a Bitcoin strategic reserve?
Some critics argue that Bitcoin doesn’t have a utility like petroleum, which would directly influence energy stability or national security, while others have doubts over BTC’s high price volatility.
