Fed Chair Jerome Powell also said the central bank has no intention of participating in any government initiative to stockpile substantial amounts of Bitcoin, further dampening sentiment.
Bitcoin fell 2.6% to $101,153.0 by 01:08 ET (06:09 GMT). The crypto briefly fell fell below $100,000 during the session.
The world’s largest cryptocurrency had hit an all-time high of $108,244.9 on Tuesday after incoming President Donald Trump further raised the prospect of a Strategic Bitcoin Reserve last week.
The Fed reduced interest rates by 25 basis points but signaled it will adopt a slower pace for future cuts.
Policymakers were now seen supporting only two rate cuts in 2025, half of prior expectations for four, indicating a more cautious stance and a prolonged period of elevated borrowing costs.
The central bank’s hawkish stance weighed on Bitcoin as tighter monetary policy reduces liquidity, making speculative assets like cryptocurrencies less attractive.
Broader risk-driven assets also plummeted on this notion, with Wall Street logging steep declines on Wednesday.
Fed chief Powell said the central bank was not allowed to accumulate large amounts of Bitcoin, saying “that’s the kind of thing for Congress to consider, but we are not looking for a law change at the Fed.”
The response came while he was discussing the possibility of central bank involvement in the government’s plan to create a Strategic Bitcoin Reserve after President-elect Donald Trump takes office.
While his comments do not have any direct bearing on the prospect for a Bitcoin reserve, they underscored growing doubts over whether the reserve will come into being, given the regulatory hurdles it is likely to face. Trump had outlined plans to build a reserve, but gave scant cues on how they would be carried out.
Elsewhere, El Salvador’s President Nayib Bukele agreed to scale back his plan to make Bitcoin a national currency in return for a crucial $1.4 billion loan from the International Monetary Fund.
The IMF deal marks a sharp pivot away from Bukele’s Bitcoin ambitions, after he adopted the crypto in 2021 and even outlined plans to issue bonds backed by Bitcoin.
While El Salvador has since put these ambitions on ice, the country’s Bitcoin stockpile has seen a large jump in valuation after the crypto’s latest rally.
Other cryptocurrencies followed Bitcoin’s lead, as traders were cautious after the Fed meeting. With two consecutive days of declines, most altcoins have lost most of the ground they had gained last week.
World no.2 crypto Ether fell 4.7% to $3,684.62, extending its decline. World no.3 crypto XRP slumped 5.6% to $2.3701.
Solana was 2.5% lower and Polygon slumped 6%, while Cardano fell more than 4%. Among meme tokens, Dogecoin lost 5.6%.
On Wednesday, Hong Kong’s securities regulator approved four cryptocurrency exchanges as part of the city’s latest initiative to remain competitive in the global race to become a hub for digital asset trading.
Source: Cryptocurrency - investing.com
