Bitcoin, riding record highs following Donald Trump’s embrace of the digital cryptocurrency, came back down to earth after Federal Reserve Chairman Jerome Powell said the central bank is not looking to hold it.
Powell on Wednesday told reporters the Fed is “not allowed to own bitcoin,” USA Today reported. He made the statements as he announced the final interest rate cut of the year and suggested fewer cuts next year.
“The Federal Reserve Act says what we can own, and we’re not looking for a law change,” Powell said. “That’s the kind of thing for Congress to consider, but we are not looking for a law change at the Fed.”
Powell was responding to a question on whether he saw any value in Trump’s suggestion that the U.S. build a reserve of bitcoin in order to stay ahead of competition from pro-crypto countries, per USA Today.
On the campaign trail, Trump pledged to make the U.S. the “crypto capital of the planet” and helped launch a crypto business with his friend Steve Witkoff, a co-chair of Trump’s inaugural committee who has been named special Middle East envoy.
Bitcoin soared earlier this month after Trump nominated crypto backer Paul Atkins as Securities and Exchange Commission chair to take over from Biden appointee Gary Gensler, who led a crypto crackdown.
The cryptocurrency hit a record high above $108,000 earlier this week. It has tumbled almost 15% since, and dropped to $92,600 on Friday morning, Bloomberg reported. Smaller tokens, including Ether and Dogecoin, were hit harder.
Bloomberg reports the mood shifted when a group of US exchange-traded funds investing directly in bitcoin on Thursday snapped a 15-day streak of continuous inflows to post a record outflow of $680 million.
The uncertainty in the crypto markets appears poised to continue over the holidays, Bloomberg reported.
“The interplay between monetary policy, institutional adoption, and political developments suggests Bitcoin will remain sensitive to both macro and crypto-specific catalysts through 2025,” Hani Abuagla, senior market analyst at XTB, said in a note on Friday, per Bloomberg.
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