On Thursday (December 19), Bitcoin plummeted below $100,000, reaching a low of $98,897. Federal Reserve Chairman Powell made a shocking statement, emphasizing that the Fed has no intention of participating in any government hoarding of large amounts of Bitcoin. The Fed cut interest rates by 25 basis points, but the 2025 interest rate forecast was unexpectedly set at 3.9%, exceeding the expected 3.4%. The "hawkish rate cut" suppressed cryptocurrency buying.
“We are not allowed to hold Bitcoin,” Powell said at a news conference following the Fed’s latest two-day policy meeting, in which policymakers cut interest rates as expected while signaling less certainty about the path of monetary policy in the coming months.
Regarding the legal issues surrounding holding Bitcoin, Powell explained: “That’s something Congress should consider, but we don’t expect the Fed to change the law.”
Powell addressed the prospect of central bank involvement in the government's so-called strategic bitcoin reserve after President-elect Donald Trump takes office. His refusal to participate has dented the value of bitcoin, which has surged along with other crypto assets since President-elect Donald Trump's victory in the Nov. 5 election on the prospect of a more hands-off approach by governments to such assets, which rarely function as actual currencies but are widely used as vehicles for speculation.
Trump has said he will establish a U.S. strategic reserve of bitcoins. But he did not reveal the specific contents of the reserve, only saying that its initial reserve may include bitcoins seized from criminals, about 200,000 bitcoins, worth about $21 billion at current prices.
Bitcoin has rallied more than 100% this year to over $100,000 on optimism about Trump’s support for cryptocurrencies. The asset has proven volatile in its 15 years of existence, which analysts say reduces its utility as a store of value or unit of exchange, both key attributes of a reserve currency.
Republican Senator Cynthia Lummis has introduced a bill to create such a reserve, and under the BITCOIN Act of 2024, the U.S. Treasury would purchase 200,000 bitcoins per year until the reserve reaches 1 million. The purchases would be funded by deposits with the Federal Reserve and gold reserves.
Funding a strategic Bitcoin reserve would likely require congressional approval and the issuance of new Treasury bonds, according to an analysis by Barclays this week. Barclays analysts said that given the possible ways to build such a reserve, "we suspect the plan will face strong resistance from the Fed."
More broadly, Fed officials have been skeptical of securities such as Bitcoin as they also abandoned efforts to create a fully digital dollar in favor of allowing the private sector to innovate payments technology.
The Fed’s primary role in cryptocurrencies appears to be centered on how these assets affect the safety of consumers and the banking industry. “We regulate and supervise banks, and we expect that interactions between cryptocurrency businesses and banks…will not threaten the health and well-being of banks,” Powell said Dec. 4.
But he also noted at the time that when it comes to crypto assets, “we don’t regulate it directly.”
Trump plans to appoint former PayPal executive David Sacks to the newly created White House artificial intelligence (AI) and cryptocurrency czar position and to appoint cryptocurrency adviser Paul Atkins to lead the U.S. Securities and Exchange Commission (SEC).
The Federal Open Market Committee (FOMC) on Wednesday voted 11-1 to lower the federal funds rate to a range of 4.25-4.5%. Cleveland Fed President Beth Hammack voted against the move, preferring to keep rates unchanged.
The updated forecast shows an interest rate of 3.9% in 2025, up from 3.4%, and a target rate of 3.4% in 2026, reflecting a slightly more hawkish medium-term stance, with a more cautious but slightly hawkish policy stance. Despite economic uncertainties such as a weak labor market and persistent inflation, the Fed's gradual adjustment of policy shows that it has struck a careful balance between controlling price pressures and supporting growth.
Bitcoin Technical Analysis
FXEmpire analyst Yashu Gola said Bitcoin’s price is forming a rising wedge pattern, which is a classic bearish reversal pattern confirmed when the price rises between two converging trend lines, indicating weak momentum.
A break below the lower trendline of the wedge could trigger a major pullback. The technical target of a wedge breakout is calculated by measuring the height of the pattern and subtracting that height from the breakout point. This setup predicts a downside target near $90,765, a 14% drop from current levels.
The 50-day exponential moving average (EMA) at $91,820 acts as the first support level. Further selling pressure could push Bitcoin towards the full target of the wedge, which is around $73,500 near the 200-day EMA.
In terms of momentum, Bitcoin’s relative strength index (RSI) remains elevated near 64, suggesting that overbought conditions could fuel selling pressure if bears take over.
Bitcoin price formed a gravestone cross on the weekly chart near $104,488, signaling a potential bearish reversal. The pattern is characterized by a long upper shadow with little body, suggesting that bulls pushed the price higher but failed to sustain momentum as sellers stepped in.
This development comes as Bitcoin tests the 1.618 Fibonacci Extension level near $102,000 as support. A break below this level could push Bitcoin to the 20-day EMA, around $80,000, while the 50-week EMA near $66,901 will be the next downside target.
The relative strength index (RSI) is hovering around 78.83, deep in the overbought territory, further supporting the possibility of a correction.
Bitcoin’s net unrealized profit/loss (NUPL) measures investors’ total profits relative to market value, a metric that shows many investors are holding unrealized profits.
It is worth noting that if NUPL tends to rise to 0.7, which is usually seen during the euphoria phase, it may indicate that a market top is forming. Conversely, a drop below 0.5 indicates increased investor uncertainty and the beginning of a broader correction.
For example, in 2013, 2017, and 2021, the NUPL rose above 0.6-0.7, indicating high market euphoria, followed by profit-taking, which led to a sharp correction. As of December 2024, the Bitcoin NUPL is 0.62, and traders should remain cautious, especially if the price of Bitcoin falls back below $100,000.
