bank from holding bitcoin as a reserve asset.

“We are not permitted to own Bitcoin under the Federal Reserve Act, and we are not pursuing any legislative changes in this regard,” Powell clarified, responding to questions about President-elect Donald Trump’s earlier proposal for a U.S. Bitcoin strategic reserve.

Trump’s campaign pledge, which included retaining the government’s seized BTC and expanding holdings, had bolstered bullish sentiment in recent months, helping propel crypto markets to new highs. Powell’s dismissal of this policy, however, fueled a sharp correction.

BTC lost 3% in the hours following Powell’s comments, leading to broader declines in major altcoins. XRP, DOGE, and Solana (SOL) fell over 5%, while Ethereum (ETH) and Binance Coin (BNB) dropped around 2.5%. Chainlink (LINK) fared the worst, plummeting 10%, reversing gains tied to a high-profile $2 million purchase by Trump-backed World Liberty Financial earlier this week.

Liquidations surged to over $700 million, with futures on smaller altcoins and meme tokens seeing disproportionate losses. Analysts noted this unusual pattern could signal overleveraged positions unwinding across speculative trades, potentially paving the way for a price recovery.

Market commentators offered mixed views on the outlook. Nick Ruck of LVRG Research highlighted the uncertainty caused by Powell’s remarks.

“Powell’s rejection of a Bitcoin reserve strategy removes a key narrative that has underpinned recent market strength. Combined with ongoing inflation concerns, this could shift sentiment further bearish in the short term,” Ruck told CoinDesk.

Still, some remain optimistic about crypto’s trajectory in the longer term. QCP Capital emphasized resilience amid macroeconomic volatility and Trump’s pro-crypto policy stance.

“The broader fundamentals remain solid, with 2025 shaping up to be a breakout year for digital assets. Temporary setbacks like this shouldn’t deter long-term investors,” QCP said in a Thursday update to clients.

As traders navigate this volatile period, attention will shift to the next macroeconomic developments and how they shape the narrative for crypto markets heading into 2024. For now, the question remains whether the recent pullback represents a healthy correction or the start of a deeper downturn.