Federal Reserve Chair Jerome Powell has ruled out the possibility of the central bank adding Bitcoin to its balance sheet, citing legal constraints under the Federal Reserve Act. Powell clarified the Fed’s stance during a press conference on December 18, where he emphasized that the central bank is not pursuing any legislative changes to enable Bitcoin ownership.
“We’re not allowed to own Bitcoin. The Federal Reserve Act says what we can own, and we’re not looking for a law change,” Powell stated. “That’s the kind of thing for Congress to consider, but we are not looking for a law change at the Fed.”
Powell’s remarks come amid increasing speculation about a proposed Strategic Bitcoin Reserve, a concept championed by President-elect Donald Trump. Trump has reiterated his commitment to advancing the U.S.’s leadership in cryptocurrency, stating, “We’re gonna do something great with crypto because we don’t want China, or anybody else … we want to be ahead.”
Bitcoin and Market Reactions
Powell’s comments sent shockwaves through the cryptocurrency market, with Bitcoin experiencing its first price drop in four days. The cryptocurrency fell 5.9%, trading at $100,605 after reaching a record high of $108,000 on December 17. The global cryptocurrency market also faced a significant downturn, losing 7.6% of its market capitalization in the last 24 hours, now valued at $3.67 trillion. Other major cryptocurrencies, including Ethereum, XRP, and Solana, posted losses ranging from 4% to 11%.
Despite the pullback, analysts at blockchain analytics platform Santiment saw a potential silver lining. “Considering BTC has stayed above $100K and not dipped as aggressively as its normal fluctuations compared to the S&P 500, this can actually be interpreted as a sign of strength once the dust settles over the next 24-48 hours,” analysts noted.
Federal Reserve Policy Changes
In addition to cryptocurrency discussions, the Federal Reserve announced a quarter-point interest rate cut, bringing the target range to 4.25%–4.5%. Powell described the current monetary policy as “significantly less restrictive,” following a full percentage point reduction from its peak. Future rate cuts in 2025, Powell indicated, would depend on inflation trends and labor market performance.
The rate cut triggered negative reactions across financial markets, with the S&P 500 and Nasdaq Composite both dropping 0.4% and the Dow Jones Industrial Average falling by approximately 100 points, marking its 10th consecutive losing day.
Trump’s Vision for a Bitcoin Reserve
President-elect Trump has amplified his vision for a Strategic Bitcoin Reserve as part of his economic strategy. The U.S. government already holds 212,847 BTC, valued at approximately $22.3 billion, from law enforcement seizures. However, it remains unclear whether Trump’s proposed reserve would incorporate these existing holdings or require additional market purchases.
Trump’s push for Bitcoin aligns with his broader goal to outpace nations like China in the cryptocurrency race. Speculation is mounting that an executive order formalizing Bitcoin as a reserve asset could be among Trump’s first actions when he takes office on January 20, 2025.
(With inputs from agencies.)
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