Federal Reserve Chairman Jerome Powell firmly reiterated the central bank’s prohibition on owning cryptocurrency, including Bitcoin, during a press conference following a two-day policy meeting on Wednesday. Powell clarified that legal restrictions prevent the Fed from engaging in crypto ownership, adding that any amendment to this policy would require Congressional action. Notably, the Fed has no plans to seek such legislative changes.
This announcement comes amid swirling speculation about the Fed’s potential interest in digital asset reserves. However, new developments under the incoming Trump administration suggest a different trajectory for Bitcoin’s role in the U.S. financial system.
Trump’s Vision: A Strategic Bitcoin Reserve
A draft executive order prepared by the Bitcoin Policy Institute outlines plans to establish a strategic Bitcoin reserve under the Exchange Stabilization Fund (ESF), managed by the U.S. Treasury. If implemented, this initiative could integrate Bitcoin into the nation’s broader financial stability framework.
President-elect Donald Trump is reportedly keen to sign this executive order after his inauguration, signaling a bold shift in federal policy toward digital assets. Currently, the U.S. government holds approximately 212,847 BTC, valued at $22.3 billion, primarily acquired through law enforcement seizures.
Interest Rate Cuts and Crypto Market Reaction
Meanwhile, the Federal Reserve announced a reduction in the interest rate ceiling to 4.50%, down from 4.75%, aligning with market expectations. However, the move spurred a 4.4% decline in the overall cryptocurrency market capitalization. Bitcoin also suffered a 2.64% daily loss, trading at $101,365 at the time of writing, though it managed to sustain a weekly gain of 0.65%.
The Federal Reserve announced an interest rate ceiling of 4.50%, expected 4.50%, previous value 4.75%.
— Wu Blockchain (@WuBlockchain) December 18, 2024
The Fed’s dot plot forecasts fewer rate cuts in 2025, scaling back from four to two reductions. Powell indicated that future adjustments would depend on inflation trends, with targets potentially taking up to two years to achieve, making near-term rate hikes improbable.
Bitcoin’s Resilience Above $100K
Despite market turbulence, Bitcoin demonstrated resilience above the $100,000 mark, a psychological threshold analysts say reflects strong underlying support. Blockchain platform Santiment highlighted Bitcoin’s relative stability compared to traditional assets like the S&P 500.
🇺🇸 The US Fed has taken the expected action of cutting interest rates by 25bps. However, the cuts came with a hint of cautiousness by Jerome Powell. His hinting of only a 50bps cut through 2025 is only half of what the public had been expecting prior to today's FOMC meeting.… pic.twitter.com/Y0iYYQgvCr
— Santiment (@santimentfeed) December 18, 2024
The Fed’s cautious monetary stance and Trump’s proposed Bitcoin reserve underscore contrasting approaches to the future of digital assets, setting the stage for significant policy shifts in the cryptocurrency landscape.
Disclaimer: The information in this article is for general purposes only and does not constitute financial advice. The author’s views are personal and may not reflect the views of Chain Affairs. Before making any investment decisions, you should always conduct your own research. Chain Affairs is not responsible for any financial losses.
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