Investing.com — Bitcoin rose on Tuesday, extending recent gains and briefly paving the way for continued optimism about the potential for strategic reserves under incoming U.S. President Donald Trump. It hit an all-time high.
Cryptocurrency markets also celebrated the addition of MicroStrategy to , but the overall rally slowed ahead of this week's Federal Reserve meeting.
By 12:25 a.m. ET (5:25 p.m. Japan time), the stock rose 1.9% to $106,623.5. The world's largest cryptocurrency hit a record high of $107,767.6 early Tuesday.
Bitcoin rises on President Trump's comments on strategic reserves, but questions remain
Bitcoin's recent rally largely came after President Trump raised the possibility of a strategic Bitcoin reserve similar to government oil reserves in an interview with CNBC last week.
Trump has promised crypto-friendly regulations if elected, and recent nominees to key cabinet and regulatory positions have all expressed support for cryptocurrencies. But analysts remain skeptical about the outlook for Bitcoin reserves, especially how they will be formed.
If President Trump were to create a reserve fund through an executive order, there would be limited funds available from the Treasury to fund further Bitcoin purchases. It's also possible that a future administration could rescind his order and liquidate the reserve fund.
Compass Point said in a recent research note that the creation of a Bitcoin reserve similar to the Strategic Petroleum Reserve would require Congressional approval.
Republicans do hold a majority in Congress, but the increase in the federal deficit means the government has to spend more deficit funds to buy more currency, but less to reduce the deficit. This scenario is likely to be opposed by bipartisan lawmakers, given the current state of affairs. It becomes a controversial topic.
Compass Point also sees little chance of passage of the recently proposed Bitcoin Act, which would require quarterly government purchases of cryptocurrencies.
The Justice Department has about 200,000 Bitcoins, most of which were seized from criminals. This stockpile could also be converted into a reserve, but it remains unclear how this will be enacted.
Cryptocurrency prices today: Altcoins cool down due to Fed focus
Prices for cryptocurrencies in general were less optimistic than Bitcoin as risk appetite cooled ahead of this week's Federal Reserve meeting. However, most altcoins continued to post strong gains in recent trading, tracking Bitcoin's rise.
The world's second-largest cryptocurrency rose 1.1% to $4,011.80, putting it back on track for a record high in 2021. The world's third-largest cryptocurrency rose 3.7% to $2.4999.
, , and meme tokens each fell more than 3%, while meme tokens fell 1.4%.
The Fed is widely expected to cut rates by Wednesday. However, the focus will be on the central bank's interest rate outlook, especially as inflation continues.
The central bank could slow the pace of easing in 2025, signaling that interest rates will remain high for an extended period of time. Such a scenario could create headwinds for crypto prices.
