The cryptocurrency market has experienced a sharp downturn following statements made by Jerome Powell, Chairman of the U.S. Federal Reserve. Let’s also take a closer look at Bitcoin's technical chart for a detailed analysis.
Powell’s comments regarding Bitcoin's role in U.S. monetary policy have unsettled the crypto market, triggering a significant decline since yesterday.
Market Overview and Bitcoin's Price Action
On the daily chart, Bitcoin (BTC) saw a steep drop to $99,000 before rebounding to its current level of $101,524. This recovery, however, hasn’t been enough to preserve the previous month’s gains, which have now been pared down to just +11%.
The decline coincided with Powell’s remarks during a press conference following the Federal Open Market Committee’s (FOMC) decision to cut interest rates by 0.25%, bringing the range to 4.25%-4.50%. Powell clarified that the Federal Reserve is neither permitted nor inclined to hold Bitcoin as part of its reserves.
Regulatory Framework Governing the Federal Reserve
The Federal Reserve operates under strict regulatory guidelines, which outline the assets it can hold. Permissible assets include U.S. Treasury bonds, mortgage-backed securities (MBS), and bonds from government-sponsored entities—assets deemed safe and low-risk, essential for managing monetary policy and ensuring financial stability.
Conversely, the Fed is barred from holding speculative or high-risk assets such as equities, commodities, or cryptocurrencies. Any change to these regulations would require congressional intervention, as only the U.S. Congress has the authority to amend the Federal Reserve’s governing framework. Without legislative action, the Fed cannot unilaterally decide to include Bitcoin in its reserves.
Powell underscored this by stating, “We cannot hold Bitcoin,” emphasizing that such decisions rest solely with Congress. He reiterated that the central bank is not considering any policy changes in this regard.
Trump’s Vision of a Strategic Bitcoin Reserve and Market Impact
Powell’s statements sharply contrast with those of newly elected President Donald Trump, who recently proposed creating a strategic Bitcoin reserve. This proposal had initially sparked excitement in the market, driving Bitcoin to an all-time high of $106,000.
In an interview with CNBC, Trump likened a Bitcoin reserve to the U.S. Strategic Petroleum Reserve, remarking, “We’ll do great things with crypto.” This statement ignited a wave of enthusiasm, prompting Bitcoin whales to accumulate over $7.28 billion in BTC within 48 hours.
However, Powell’s comments have since dampened market sentiment, leading to a 5.17% decline in Bitcoin’s price, which briefly fell below $100,000.
Bitcoin Technical Analysis: Support and Resistance Levels
Bitcoin (BTC/USD) is showing signs of recovery after testing the critical support level of $99,480. This level held firm due to strong buying interest, reinforced by the maintenance of the ascending trendline.
Currently trading at $101,144 (+1.50% daily), Bitcoin remains below the pivot point at $103,787, which aligns with the 50-day exponential moving average (50 EMA). This level represents a significant hurdle for bullish momentum.
- Upside Projections: Breaking above $103,787 could open the path to higher targets at $105,263 and $107,628.
- Downside Risks: Failing to hold $99,480 could expose Bitcoin to further declines, with subsequent support levels at $97,339 and $95,773.
The Relative Strength Index (RSI) at 39 suggests oversold conditions, hinting at a potential short-term rebound. However, a sustained bullish reversal would require Bitcoin to establish consistent momentum above the 50 EMA.
Traders remain cautious, closely monitoring the pivot point to determine the next direction in this uncertain market phase.
Long-Term Optimism: Could Bitcoin Reach New Highs?
Despite current uncertainties, the long-term outlook for Bitcoin remains positive, bolstered by increasing institutional adoption and the advent of spot Bitcoin ETFs.
Jack Mallers, CEO of Strike, predicts that Bitcoin could reach $1 million if the U.S. government were to purchase four million BTC. However, he maintains a more realistic target of $250,000, attributing Bitcoin’s growth potential to its low inflationary nature and the escalating global debt crisis.
Many experts continue to advocate for the creation of a U.S. Strategic Bitcoin Reserve. Under such a plan, the initiative could start with the over 200,000 BTC currently seized by the U.S. government, valued at $21 billion, and managed by the Treasury Department.
If implemented, this strategy could stabilize the market, attract new investments, and cement Bitcoin’s status as a cornerstone of global finance.