Bitcoin saw a sharp decline on Friday, briefly falling below $92,000 before recovering to just over $97,000. This followed a record high of over $108,000 on Tuesday, marking a dramatic shift in the market. The price drop was largely due to a statement from Federal Reserve Chairman Jerome Powell, who confirmed that the Federal Reserve would not hold Bitcoin in its reserve, causing the world’s largest cryptocurrency to fall 7%.
“We are not allowed to own Bitcoin,” Powell said during a recent discussion. “The Federal Reserve Act specifies what we can own, and we are not seeking a change in the law. That is something Congress should consider, but it is not on the Fed’s agenda.”
The news also affected the broader crypto market, with the global market capitalization dropping 1.2% to $3.52 trillion, according to CoinGecko. Ethereum, the second-largest cryptocurrency, saw a 10% drop before recovering to $3,467 on Friday morning. Solana, which ranks sixth by market capitalization, also lost 10% of its value, trading at $192 at the time of writing.
Bitcoin ETFs See First Outflows in Weeks
In another blow to the market, Bitcoin exchange-traded funds (ETFs) experienced significant capital outflows, with $650 million withdrawn from Bitcoin ETFs this week. Ethereum ETFs were not spared either, with over $60 million in outflows. This marks a change in investor sentiment and a sign of greater uncertainty in the market.
Christmas volatility expected for Bitcoin
As the holiday season approaches, analysts predict that the price of Bitcoin could continue to fluctuate. James Toledano, COO of Unity Wallet, noted that Bitcoin tends to be unpredictable during this time of year. “Bitcoin is always volatile, just like water is always wet,” he explained. “Sometimes the price goes up after the holidays, other times it goes down. There is no clear pattern.”
Toledano also noted that while reduced trading volumes during the holidays could increase volatility, the absence of institutional investors could help stabilize prices. However, sudden changes in macroeconomic news or unexpected events could still cause price swings. With key events such as former President Trump returning to the White House in January 2024, Toledano believes the cryptocurrency market could see renewed activity.
In the coming weeks, the price of Bitcoin will likely remain unpredictable as the market digests news from regulators and political developments. Investors should be on the lookout for any sudden changes as 2024 promises to be another eventful year for cryptocurrencies.
Also read: Trump Proposes US Bitcoin Reserve to Strengthen National Assets, Reduce Debt