On the night of the 19th at around 3 AM, Federal Reserve Chairman Jerome Powell, when asked by reporters about the Bitcoin reserve issue, stated: "We are not allowed to hold Bitcoin, nor do we wish to change the law." This statement instantly triggered a severe market reaction, especially in the cryptocurrency sector. The price of Bitcoin plummeted almost immediately in the following hour, rapidly approaching the critical threshold of $100,000, while other altcoins also experienced varying degrees of decline, with Dogecoin ($DOGE) dropping by more than 10%.

Reasons for the Market Crash

Powell's remarks undoubtedly caused a market shock, as they suggested that the U.S. government's stance on cryptocurrencies has not relaxed, but may instead strengthen regulatory measures. The U.S. government has maintained a cautious attitude towards cryptocurrencies, and Powell's comments further confirmed the uncertainty regarding regulation. Given the significant influence of the Federal Reserve Chairman, this public statement triggered investor anxiety about the future of cryptocurrencies. Many investors began to worry that the legal status of cryptocurrencies could face greater challenges, leading to a substantial outflow of funds from the market, thereby exacerbating the plunge in Bitcoin and other cryptocurrencies.

Institutional Investors' Preplanned Short Selling

In the cryptocurrency market, the actions of institutional investors often have a tremendous impact. With the release of Powell's statements, market sentiment quickly turned to panic, prompting many short-term holders to sell off their assets. Meanwhile, some institutions may have already made short positions in advance, taking advantage of the spreading panic to profit from short-selling. Such short-selling behavior typically intensifies market volatility and further drives prices down.

Panic Triggered by News

Market panic is often triggered by a highly influential piece of news. Although Powell's comments did not essentially reveal the risk of Bitcoin facing severe suppression, the market was overly sensitive, especially when the cryptocurrency market was in an unstable state; even a slight negative news item could become the last straw that breaks the market's back. Investor sentiment swiftly shifted, leading to a significant withdrawal of funds, which caused this sharp decline.

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