Bitcoin Drops Below $100K After Fed Rejects Bitcoin Reserve

Bitcoin experienced a sharp decline on Friday, briefly dipping below $92,000 before recovering to just above $97,000. This followed a record high of over $108,000 on Tuesday, marking a dramatic shift in the market. The price drop was largely triggered by a statement from Federal Reserve Chair Jerome Powell, who confirmed that the Fed would not hold Bitcoin in its reserve, causing the world’s largest cryptocurrency to fall by 7%.

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“We’re not allowed to own Bitcoin,” Powell said during a recent discussion. “The Federal Reserve Act specifies what we can own, and we’re not seeking a law change. That’s something for Congress to consider, but it’s not on the Fed’s agenda.”

The news also impacted the wider crypto market, with the global market cap shrinking by 1.2%, down to $3.52 trillion, according to CoinGecko. Ethereum, the second-largest cryptocurrency, saw a 10% drop before recovering to $3,467 by Friday morning. Solana, ranked sixth by market cap, also lost 10% of its value, trading at $192 at the time of writing.

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Bitcoin ETFs Experience Their First Outflows in Weeks

In another blow to the market, Bitcoin exchange-traded funds (ETFs) saw significant outflows, with $650 million pulled from Bitcoin ETFs this week. Ethereum ETFs weren’t spared either, with over $60 million in outflows. This marks a shift in investor sentiment and a sign of increased uncertainty in the market.

Holiday Volatility Expected for Bitcoin

As the holiday season approaches, analysts predict that Bitcoin’s price could continue to fluctuate. James Toledano, Chief Operating Officer at Unity Wallet, noted that Bitcoin tends to be unpredictable during this time of year. “Bitcoin is always volatile, just like water is always wet,” he explained. “Sometimes the price rises after the holidays, other times it falls. There’s no clear pattern.”

Toledano also pointed out that while reduced trading volumes during the holidays could heighten volatility, the absence of institutional investors might help stabilize prices. However, sudden shifts in macroeconomic news or unexpected events could still lead to price swings. With key events like former President Trump’s return to the White House in January 2024, Toledano believes the crypto market could see renewed activity.

In the coming weeks, Bitcoin’s price will likely remain unpredictable as the market digests news from regulators and political developments. Investors should keep an eye on any sudden changes, as 2024 promises to be another eventful year for cryptocurrencies.

Also Read: Trump Proposes U.S. Bitcoin Reserve to Strengthen National Assets and Reduce Debt