Bitcoin Falls Below $100,000, Losing Over 5 Percent of Its Value, as Fed Chair Powell Confirms the Central Bank Cannot Hold Bitcoin

Bitcoin falls 0.10 percent this week. Powell's remarks come after President-elect Donald Trump suggested that he plans to create a Bitcoin strategic reserve which propelled crypto market hopes and supported Bitcoin's rise to a record high.

Bitcoin fell below $100,000 on Wednesday, shedding 0.96 percent after Federal Reserve Chair Jerome Powell confirmed that the central bank cannot legally hold Bitcoin, leaving the decision to Congress.

Powell’s remarks follow President-elect Donald Trump’s suggestion to create a U.S. Bitcoin strategic reserve, sparking hopes within the crypto market and contributing to Bitcoin’s record highs.

As of 7:13 GMT, Bitcoin rose 0.96 percent to $101,115 after dropping to $98,793 earlier in the session. In the last seven days, the world’s largest cryptocurrency lost 0.10 percent.

This year, the crypto market has returned to the forefront of discussions following Donald Trump’s election as president. Investors are speculating that the incoming Trump administration will pave the way for a friendlier regulatory environment, boosting market sentiment. Bitcoin has gained 192 percent so far this year.

Since the November 5 election, Bitcoin has risen by over 50 percent. The total value of the cryptocurrency market has nearly doubled in the past year, reaching a record high of over $3.8 trillion, according to CoinGecko.

Read: Gold reserves at CBUAE cross $6.3bn in Q3 2024

Prospects of a strategic reserve

Trump has proposed creating a U.S. Bitcoin strategic reserve without disclosing further details about the specific holdings. He did, however, mention that the initial holdings could include bitcoin seized from criminals. According to data provider CoinGecko, governments worldwide held 2.2 percent of the total Bitcoin supply as of July, with the United States having nearly 200,000 Bitcoins, valued at over $20 billion.

In July, Republican Senator Cynthia Lummis introduced a bill to create a Bitcoin reserve managed by the Treasury. The bill proposes that the Treasury establish a program to purchase 200,000 bitcoins per year for five years until the stockpile reaches one million tokens. This represents about 5 percent of the total global supply of Bitcoin, estimated at around 21 million.

The Treasury would fund the purchases using profits from Federal Reserve banks’ deposits and gold holdings. The reserve would then be held for a minimum of 20 years. However, funding for this reserve would need to be approved by Congress, as Powell pointed out.

Powell's skepticism toward a Bitcoin strategic reserve aligns with the Fed's stance on holding digital assets. Earlier this year, Powell stated that policymakers were “nowhere near” considering the implementation of a central bank digital currency.

Following Powell’s latest comments, the broader cryptocurrency market also declined, with Ethereum down 6.8 percent, Binance Coin dropping by 4.6 percent, and Dogecoin shedding 11 percent.