Bitcoin Falls Below $100,000, Federal Reserve Powell Rejects Bitcoin Reserve

On Friday, Bitcoin price plunged to nearly $92,000 before rebounding to over $97,000, although it hit a new all-time high of over $108,000 on Tuesday.

Part of the selloff was sparked by Wednesday’s news that the Federal Reserve would not hold Bitcoin in its reserves, causing the world’s largest cryptocurrency to fall 7%.

“We are not allowed to own bitcoin,” said Federal Reserve Chairman Jerome Powell. “The Federal Reserve Act dictates what we can own, and we are not seeking to change the law. That’s the kind of thing Congress should be thinking about, but we’re not seeking a legislative change at the Fed.”

According to CoinGecko, the overall global cryptocurrency market cap fell by 1.2%, reaching $3.52 trillion.

Ethereum, the world’s second-largest digital asset, also fell 10% but recovered on Friday morning to reach a price near $3,467. Meanwhile, Solana, the world’s sixth most valuable cryptocurrency with a market cap of $92 billion, is currently trading at $192 at the time of writing, having fallen 10%.

On Thursday, Bitcoin exchange-traded funds (ETFs), which first hit the market this January, saw their first outflows in weeks, with Bitcoin ETFs recording $650 million in outflows. Meanwhile, Ethereum ETFs saw outflows of over $60 million.

With the holiday season approaching, some market analysts stressed that “mixed behavior” can be expected over Christmas and New Year: “The first rule of Bitcoin is that it is always volatile, just like water is always wet,” said James Toledano, Chief Operating Officer Officer at Unity Wallet. “The behavior is always inconsistent and there is no discernible pattern at the end of the year that carries over into the next. Sometimes the price rises in the new year and sometimes it falls. So historically we can say that Bitcoin typically exhibits a mixed pattern of behavior over Christmas and New Year.

“While reduced liquidity can increase volatility, the absence of major institutional activity can actually stabilize prices,” Toledano added. “Notable exceptions are years when macroeconomic news or market catalysts trigger sudden moves. This year, a lot depends on investor sentiment following the 2024 exchange-traded fund approval and the Trump factor, among other macroeconomic trends. A relatively calm period is possible.” “Unless unexpected news reignites volatility. But given that pro-Bitcoin Trump will be back in the White House on January 20th, I think we can expect strong price action again very soon,” he said.