On December 19, the cryptocurrency market experienced a 7.5% drop following the US Federal Reserve's decision to lower the interest rate by 25 basis points to a target of 4.25%-4.50%. This decision led to an outflow of investments from riskier assets, including cryptocurrencies.
The Fed's Decision and Its Consequences
On December 19, the US Federal Reserve reduced the interest rate by 25 basis points to a level of 4.25%-4.50%. This reduction affected the cryptocurrency market, which dropped by 7.5% as investors began to move away from riskier assets. Beth Hammack, President of the Federal Reserve Bank of Cleveland, voted in favor of maintaining the current interest rates, emphasizing concerns about inflation.
Legal Issues and Cryptocurrencies
Federal Reserve Chair Jerome Powell stated at a conference on December 18 that the central bank will not hold Bitcoin and is not seeking legislative changes in this area. His comments impacted the market, especially following US President Donald Trump's statements about plans to create a US Bitcoin strategic reserve.
Proposals for Increased Liquidity
US Senator Cynthia Lummis proposed creating a strategic Bitcoin reserve, suggesting that the US Treasury would purchase 200,000 bitcoins annually. This could increase liquidity in the financial system and boost interest in cryptocurrencies both in the US and Europe.
The increased volatility of the cryptocurrency market is linked to changes in US monetary policy and legal aspects of cryptocurrency regulation. This creates both new opportunities and challenges for investors and policymakers.
