Dec 19 2024: Bitcoin continued its decline on Thursday, falling 2.6% to $101,153.0 by 01:08 ET (06:09 GMT), as the Federal Reserve’s hawkish outlook raised concerns about tighter monetary conditions and dampened investor risk appetite. During the session, Bitcoin briefly dipped below the psychological $100,000 level.
The world’s largest cryptocurrency had recently touched an all-time high of $108,244.9 on Tuesday, spurred by optimism surrounding incoming President Donald Trump’s mention of a Strategic Bitcoin Reserve. However, Fed Chair Jerome Powell’s comments that the central bank has no plans to support such a reserve have tempered enthusiasm.
Bitcoin Under Pressure from Fed’s Hawkish Signals
The Federal Reserve reduced interest rates by 25 basis points on Wednesday but signaled a slower pace of future cuts. Policymakers now expect just two rate reductions in 2025, down from earlier projections of four.
This cautious stance suggests prolonged periods of higher borrowing costs, which weighed heavily on risk-driven assets, including Bitcoin. The Fed’s tightening outlook reduces liquidity, making speculative assets like cryptocurrencies less attractive.
Wall Street also experienced sharp losses, with major indices sliding in response to the Fed’s cautious stance.
Powell Rejects Bitcoin Accumulation Plans; El Salvador Adjusts Bitcoin Strategy
Powell clarified during his press conference that the Fed would not pursue substantial Bitcoin purchases, emphasizing that such actions would require Congressional approval. His remarks have cast further doubt on President-elect Trump’s proposed Strategic Bitcoin Reserve, as regulatory hurdles and operational challenges continue to loom.
Meanwhile, El Salvador’s President Nayib Bukele announced a pivot away from his Bitcoin-focused agenda to secure a $1.4 billion loan from the International Monetary Fund (IMF). Bukele, who made Bitcoin legal tender in 2021, scaled back plans for Bitcoin-backed bonds and national adoption in exchange for the financial aid.
Despite this shift, El Salvador’s Bitcoin holdings have seen significant gains, thanks to the cryptocurrency’s recent rally.
Altcoins Retreat After Fed Meeting
Altcoins followed Bitcoin’s lead, with most experiencing sharp declines over the past two days. Ether, the second-largest cryptocurrency, fell 4.7% to $3,684.62, while XRP dropped 5.6% to $2.3701.
Solana and Polygon declined 2.5% and 6%, respectively, while Cardano saw a drop of over 4%. Meme coin Dogecoin also fell 5.6%.
In contrast to the bearish sentiment, Hong Kong’s securities regulator approved four cryptocurrency exchanges as part of its efforts to position the city as a global hub for digital asset trading.
