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Bitcoin extended its recent rally on Tuesday, briefly reaching a fresh all-time high as investor sentiment remained buoyed by hopes of pro-crypto policies under incoming U.S. President Donald Trump. The surge comes as Trump floated the idea of establishing a Strategic Bitcoin Reserve—a move that has sparked both enthusiasm and skepticism across financial and crypto markets.
The world’s largest cryptocurrency rose 1.9% to $106,623.5 by 00:25 ET (05:25 GMT) after hitting a record peak of $107,767.6 earlier in the day. Bitcoin’s sustained strength also coincided with broader excitement over MicroStrategy’s addition to the Nasdaq 100 index, reinforcing institutional interest in cryptocurrencies. However, gains across the crypto space showed signs of slowing as investors turned their attention to this week’s critical Federal Reserve policy decision.
Trump’s Bitcoin Reserve Proposal Fuels Optimism, But Questions Persist
The primary driver of Bitcoin’s latest surge is renewed optimism stemming from Trump’s comments last week during an interview with CNBC. Trump suggested the formation of a Strategic Bitcoin Reserve, akin to the U.S. government’s existing Strategic Petroleum Reserve. The proposal aligns with Trump’s broader promise to implement crypto-friendly policies, including regulatory reforms aimed at positioning the United States as a global leader in cryptocurrency adoption.
Trump’s recent cabinet nominations, which include individuals with notably pro-crypto leanings, have added to market confidence that significant policy changes could be on the horizon. However, analysts caution that establishing a Bitcoin reserve faces formidable hurdles, both logistically and politically.
Research from Compass Point highlights that forming such a reserve through an executive order would be constrained by the Treasury’s limited discretionary funding. Without Congressional approval, Trump would face significant challenges in financing large-scale Bitcoin acquisitions. Moreover, any executive order establishing the reserve could be rescinded by a future administration, raising questions about its long-term viability.
Even with a Republican majority in Congress, bipartisan resistance is likely, given heightened concerns over the soaring federal deficit. Additional deficit-funded Bitcoin purchases would face opposition, particularly as lawmakers grapple with the contentious issue of fiscal responsibility. Compass Point also downplayed the likelihood of the Bitcoin Act—a newly proposed legislative effort that calls for quarterly government Bitcoin purchases—advancing through Congress.
Another potential avenue involves the U.S. Department of Justice’s (DOJ) current holdings of approximately 200,000 Bitcoins, valued at over $20 billion. These coins, largely confiscated from criminal activities, could theoretically serve as the foundation of a strategic reserve. However, it remains unclear how this stockpile could be formalized into a national asset or integrated into broader fiscal and monetary policy frameworks.
Altcoins Lose Momentum Ahead of Fed Decision
While Bitcoin continues to dominate headlines, broader crypto markets showed mixed signals on Tuesday as risk appetite began to wane. Investors are bracing for the outcome of the Federal Reserve’s two-day policy meeting, where officials are widely expected to announce a 25-basis-point rate cut on Wednesday. However, concerns about the Fed’s outlook for interest rates in 2025 tempered enthusiasm across the altcoin space.
The second-largest cryptocurrency, Ether, managed to rise 1.1%, trading at $4,011.80 and approaching its record high set in 2021. XRP, the third-largest crypto asset, outperformed with a 3.7% gain, reaching $2.4999.
However, leading altcoins such as Solana, Cardano, and Polygon each fell by more than 3%, indicating profit-taking among traders after recent strong gains. Meme tokens also faced headwinds, with Dogecoin slipping 1.4%.
The Federal Reserve’s policy announcement remains the key near-term catalyst for crypto markets. While a rate cut is largely priced in, the central bank’s guidance on the pace of monetary easing next year will be critical. Recent inflation data, which shows persistent price pressures, has heightened the risk that the Fed could signal a slower rate-cutting cycle in 2025. Such a scenario—where interest rates remain elevated for longer—could pose challenges for the crypto sector, which typically thrives in lower-rate environments.
Market Outlook: Bitcoin’s Momentum Tested by Macro Risks
Bitcoin’s rally to record highs underscores the growing influence of policy developments and investor expectations around Trump’s pro-crypto agenda. While optimism about a Strategic Bitcoin Reserve has provided a powerful tailwind, analysts remain cautious about the feasibility of Trump’s proposal and its broader implications.
In the short term, Bitcoin’s price trajectory will likely be shaped by macroeconomic factors, particularly the Federal Reserve’s stance on interest rates. Should the Fed adopt a hawkish tone, signaling prolonged monetary tightening, crypto markets may face renewed headwinds. Conversely, any indication of an accelerated easing cycle could fuel further upside momentum for Bitcoin and altcoins alike.
As the cryptocurrency landscape continues to evolve, Bitcoin’s resilience in the face of uncertainty highlights its growing role as both a speculative asset and a potential strategic reserve. For now, all eyes remain on Washington as the next chapter in Bitcoin’s story unfolds.
