Federal Reserve Chair Rules Out Bitcoin on Fed's Balance Sheet, Markets React
Federal Reserve Chair Jerome Powell has unequivocally ruled out the possibility of the central bank holding Bitcoin, citing legal constraints under the Federal Reserve Act. During a press conference on December 19, Powell clarified that the Fed is not seeking legislative changes to enable cryptocurrency ownership.
“We’re not allowed to own Bitcoin,” Powell stated. “The Federal Reserve Act defines what we can hold, and we’re not pursuing a change in the law. That’s a matter for Congress, but it’s not something the Fed is considering.”
Powell’s comments, coupled with a more cautious tone from the Federal Reserve, prompted a sharp decline in Bitcoin’s value. The cryptocurrency fell 5.9% to $100,605, retreating from its record high of $108,000 set on December 18. The broader cryptocurrency market also experienced a downturn, with its total capitalization falling by 7.6% to $3.67 trillion. Ethereum, XRP, and Solana recorded losses ranging from 4% to 11%.
Source:Coinmarketcap
Market and Policy Impacts
On the same day, the Federal Reserve announced a quarter-point interest rate cut, bringing the target range to 4.25%–4.5%. Powell emphasized that the Fed’s monetary policy is now “significantly less restrictive” after reducing rates by a full percentage point from their peak. He noted that future rate adjustments in 2025 would depend on inflation trends and labor market data.
Equity markets also reacted negatively, with the S&P 500 and Nasdaq Composite both dropping 0.4%, while the Dow Jones Industrial Average fell by approximately 100 points, extending its losing streak to 10 days.
Despite the declines, analysts from blockchain platform Santiment highlighted Bitcoin’s relative resilience. “BTC remaining above $100K despite the correction could be seen as a sign of underlying strength. We anticipate stabilization over the next 24-48 hours,” the firm noted.
Trump Advocates for Bitcoin Strategic Reserve
President-elect Donald Trump, meanwhile, reiterated his support for Bitcoin as a strategic asset. During a December 12 address, Trump proposed creating a U.S. Bitcoin reserve to ensure the nation’s leadership in the global cryptocurrency space.
“We’re going to do something incredible with crypto. We don’t want China or others to get ahead of us,” Trump said.
The U.S. government currently holds over 212,000 BTC, valued at $22.3 billion, from law enforcement seizures. While Trump’s vision for a Bitcoin reserve remains undefined, there is growing speculation that an executive order could establish Bitcoin as a reserve asset after his inauguration on January 20, 2025.
Analysts believe these developments signal a significant shift in the U.S. government’s approach to cryptocurrency, even as the Federal Reserve maintains its cautious stance.
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