Bitcoin, the digital currency that has taken the world by storm, recently experienced a significant drop. It fell 2.2% to $104,800.0 by 09:35 ET (14:35 GMT), following its breach of the $108,000 level the previous day. This large cryptocurrency had reached an all-time high of $108,244 for a brief moment on Tuesday. The event was triggered by incoming President Donald Trump's mention of a Strategic Bitcoin Reserve during an interview with CNBC last week. Trump had promised to introduce crypto-friendly regulations if elected, and his recent nominations for key cabinet and regulatory roles showed a strong pro-crypto stance.

Analysts' Doubts on Bitcoin Reserve

Analysts remain skeptical about the practicality of establishing a Bitcoin reserve. Given Trump's unwavering belief in the supremacy of the dollar, they believe a strategic reserve is unlikely. Recent data indicates that large Bitcoin holders, or whales, are having a significant impact on the cryptocurrency's price movements. According to Ali Martinez, an on-chain analyst, Bitcoin whales had purchased 70,000 bitcoins by Tuesday. The growing demand from these whales has surpassed the available supply, fueling the continuous increase in Bitcoin prices. Only 900 bitcoins can be mined per 48 hours, which is far from meeting the substantial demand from Bitcoin whales. This has led to growing concerns that if this trend continues, a significant supply shortage may be imminent.

The Impact of Trump Administration

The Trump administration has opened a new chapter in the crypto ecosystem in the U.S. Along with bringing a sense of crypto friendliness, the new administration is eager to promote crypto assets by leading discussions on how to best regulate them and stimulate digital asset development in the country. As analysts noted, the crypto industry has been advocating for regulatory guardrails for years. The expectation of such future regulations has established a sort of "floor" for the worst regulatory environment for crypto, which has already passed. In other words, they believe the crypto ecosystem will become a safer, more transparent, and more productive industry from this point forward.

Other Cryptocurrencies' Performance

Other cryptocurrencies also followed Bitcoin's lead as traders remained cautious during the Fed meeting. Investors took some profits from altcoins, which had seen strong gains in recent sessions. World no.2 crypto Ether slumped 4% to $3,842.77, continuing its decline. World no.3 crypto XRP dropped over 5% to $2.51. Solana inched 2.4% lower and Polygon slumped 6.1%, while Cardano lost 5.7%. Among meme tokens, Dogecoin dipped 5%. The Fed is widely expected to cut interest rates by 25 basis points on Wednesday. However, the focus is on the central bank's long-term outlook on rates, especially in the face of sticky inflation and a resilient economy. The central bank may suggest a slower pace of rate cuts in 2025, indicating that rates could remain higher for an extended period. This situation could pose challenges for cryptocurrency prices.