In the rapidly evolving landscape of cryptocurrency, Bitcoin has recently captured headlines with its remarkable fluctuationsEarly on December 19, Bitcoin's price experienced a sharp decline, briefly dipping below the $100,000 mark, marking its most significant single-day drop since AugustJust the previous day, excitement was palpable as Bitcoin had surged to an all-time high of over $108,000. This sudden shift exemplifies the volatile nature of cryptocurrency, where fortunes can turn in moments.

As of now, Bitcoin is trading at approximately $100,683 per coin, reflecting a minor increase of 0.28%. This price volatility is not only a matter for individual investors but also a topic of concern for policymakers and financial institutions worldwide.

In the background, significant financial news unfolded with the U.SFederal Reserve announcing a 25 basis point interest rate cut, lowering the target range to between 4.25% and 4.50%. This move marks the third consecutive reduction, aligning with market expectations

Federal Reserve Chairman Jerome Powell indicated that, while the Fed is not looking to tighten its monetary policy, it will approach any future adjustments with caution.

The announcement had an immediate impact on financial markets, with the U.Sdollar climbing in response to the news, subsequently causing Bitcoin’s value to dip furtherIn a press conference following the rate decision, Powell specifically addressed the speculation surrounding Bitcoin's inclusion in the Fed's balance sheet, stating unequivocally that the Federal Reserve has no intention of adding Bitcoin to its portfolioThis stand reflects the established regulatory framework governing what assets the Fed can hold, emphasizing that any changes to this structure would require Congressional consideration.

Zaheer Ebtikar, founder of the cryptocurrency investment fund Split Capital, shared his insights on the market's reaction

He highlighted that investors are grappling with the Fed's more dovish stance anticipated for 2025, which has led many traders and market makers within the cryptocurrency domain to adopt a more cautious risk posture.

David Lawant, the research head at FalconX, a major cryptocurrency brokerage, noted that while current interest rate predictions are influencing Bitcoin's price, these fluctuations are unlikely to have long-lasting effectsHe pointed out that Bitcoin's correlation with major stock indices has diminished, suggesting a shift in investor behavior and market dynamics that is less tethered to traditional financial indicators.

Earlier in the year, at a Bitcoin conference held in Nashville, Tennessee, discussions emerged around utilizing the approximately 200,000 Bitcoins — worth around $18 billion — held by the government, primarily acquired through seizures related to criminal activities

The idea was to create a reserve leveraging these assets, which caught the attention of several lawmakers.

Senator Cynthia Lummis, a prominent Bitcoin supporter, has been a key advocate for this initiativeShe proposed a Bitcoin bill in July 2024, recommending the establishment of a decentralized Bitcoin reserve network managed by the U.STreasuryThis legislation outlines a plan for the government to acquire up to 200,000 Bitcoins annually over the next five years, potentially amassing a total of 1 million Bitcoins — roughly 5% of Bitcoin's total supply.

However, not all financial experts are on board with this ambitious planArash Aloush, an assistant professor of finance and fintech at Dublin City University, expressed skepticism about the feasibility of creating such a reserveHe pointed out that formal governmental support for Bitcoin would signify a significant shift in stance — one that could involve deploying public funds into what is widely recognized as an unstable asset

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This contradicts the cautious approach the government has maintained toward cryptocurrencies thus far.

Aloush elaborated on the myriad challenges this initiative might face, particularly regulatory hurdlesHe asserted that a substantial overhaul of existing regulatory policies is essential to cultivate a more favorable market environment for cryptocurrency investmentThis transformation is vital for aligning with market development trends and propelling industry progressMoreover, he emphasized the pivotal role of several conservative institutions whose hesitation towards highly volatile, decentralized assets contributes to the current market's inherent instabilityThe actions of these institutions, which remain on the sidelines due to apprehension concerning market fluctuations, are crucial for ensuring broader market resilience and growth.

Throughout his analysis, Aloush raised alarms regarding Bitcoin's limited market capitalization, which he believes hinders its capability to serve as a stable reserve asset