Investing.com– Bitcoin rose on Tuesday, extending recent gains and briefly hitting record highs on sustained optimism over the potential for a Strategic Reserve under incoming U.S. President Donald Trump.
Crypto markets were also cheered by MicroStrategy being added to the Nasdaq 100 index, although overall gains petered out in anticipation of a Federal Reserve meeting this week.
Bitcoin rose 3.5% to $107,380.0 by 09:06 ET (14:06 GMT), just below the all-time high of $107,822 it reached a day earlier.
Bitcoin boosted by Trump talk on strategic reserve, but questions persist
Bitcoin’s latest rally came largely after Trump raised the prospect of a Strategic Bitcoin Reserve, akin to the government’s petroleum reserve, during an interview with CNBC last week.
Trump had promised crypto-friendly regulations if elected, with his recent nominations for key cabinet and regulatory positions all harboring pro-crypto stances. But analysts have remained skeptical over the prospect of a Bitcoin reserve, especially on how it could be formed.
If Trump were to form the reserve through an executive order, he would have limited funding available from the Treasury to fund more Bitcoin purchases. A future administration could also rescind his order, dissolving the reserve.
The formation of a Bitcoin reserve akin to the Strategic Petroleum Reserve will require Congressional approval, Compass Point said in a recent research note.
While the Republicans do hold a majority in Congress, an elevated Federal deficit will mean that the government will have to dole out more deficit funding to purchase additional coins- a scenario that will likely be opposed by bipartisan lawmakers, given that trimming the fiscal deficit has become a contentious topic.
Compass Point also sees few chances that the Bitcoin Act, a recently proposed legislation that calls for quarterly government purchases of the crypto, will be passed.
The Department of Justice holds about 200,000 Bitcoins, which were mostly confiscated from criminals. This stockpile could also be converted into a reserve, although it remains unclear how this will be enacted.
Crypto price today: altcoins see soft gains ahead of Fed meeting, XRP soars
Broader crypto prices were less upbeat than Bitcoin, as risk appetite cooled in anticipation of a Fed meeting this week. But most altcoins were sitting on strong gains in recent sessions, tracking Bitcoin’s rally.
World no.2 crypto Ether added 2.5% to $4,007.71, coming back in sight of a record high hit in 2021. World no.3 crypto XRP soared over 11% to $2.64.
Solana and Cardano climbed more than 3% each, while Polygon remained flat. Among meme tokens, Dogecoin advanced 2.8%.
The Fed is widely expected to cut interest rates by 25 basis points on Wednesday. But the focus will be squarely on the central bank’s outlook on rates, especially in the face of sticky inflation.
The central bank could potentially signal a slower pace of easing in 2025, indicating that rates will remain high for longer. Such a scenario could herald some headwinds for crypto prices.
Bitcoin hash rate hits all-time high
As Bitcoin made its way to new record highs, spot Bitcoin ETFs saw approximately $2.2 billion in net inflows last week, pushing quarter-to-date inflows to $16.7 billion—39% higher than the total for Q1 2024, according to a report by H.C. Wainwright.
Meanwhile, bitcoin mining stocks fell 11.1% week-over-week, underperforming both Bitcoin and broader equity markets.
The Bitcoin network hash rate increased by 6.8% over the week, H.C. Wainwright notes, reaching an all-time high of 801 EH/s (7-day average) on December 15. Network (LON:NETW) difficulty, which stood at 103.9T after a +1.6% adjustment on December 2, climbed further to a record 108.5T following a +4.4% adjustment on December 16.
Higher BTC prices also boosted hash prices, which rose 1.7% week-over-week to $0.0635 per terahash per day.
Ambar Warrick contributed to this report.
