Federal Reserve Chair Jerome Powell’s hawkish stance on interest rate cuts has sent shockwaves through financial markets, causing a sharp selloff across multiple asset classes, including cryptocurrencies.
Crypto markets extended Wednesday’s losses into Thursday after Powell’s comments dashed investor hopes for aggressive interest rate cuts in 2024. Bitcoin (BTC) struggled to maintain its footing above $100,000, slipping to the low-$97,000 range during U.S. trading hours. Briefly recovering to around $98,000, BTC faced renewed selling pressure and dropped below $96,000, marking a 4.8% decline over the past 24 hours.
Altcoins experienced even steeper losses, with the CoinDesk 20 Index tumbling over 10% in the same period. Ethereum (ETH) fell by 10.8% to trade below $3,500, while other major altcoins—including Cardano’s ADA, Chainlink’s LINK, Aptos’ APT, Avalanche’s AVAX, and Dogecoin’s DOGE—saw declines ranging from 15% to 20%. Solana’s SOL took a particularly hard hit, plunging 26% from its recent all-time high and erasing nearly all gains from its post-election rally.
According to data from CoinGlass, approximately $1.2 billion in leveraged crypto derivatives positions were liquidated over the past 24 hours. Long positions, representing bets on rising prices, accounted for over $1 billion of the total liquidations.
Traditional markets also felt the pressure. While U.S. stock indexes rebounded slightly from Wednesday’s lows, gains faded during the session. The S&P 500 and Nasdaq ended the day just 0.5% higher.
The recent surge in crypto prices had been largely driven by optimism surrounding pro-crypto policies expected from Donald Trump’s potential return to office. However, Powell’s stern remarks about inflation and a slower-than-expected timeline for rate cuts delivered a harsh reality check, triggering a selloff across crypto, equities, and even gold.
Meanwhile, the U.S. Dollar Index (DXY) surged above 108, reaching its highest level since November 2022, while 10-year U.S. Treasury yields climbed above 4.6%, marking their highest point since May.
“The crypto market was already vulnerable to a correction following Bitcoin’s rally past $100,000,” said Joel Kruger, market strategist at LMAX Group. “The fallout from Wednesday’s Fed decision proved to be the breaking point.”
Azeem Khan, co-founder and COO of layer-2 network Morph, offered a more optimistic perspective. “When viewed in the context of year-over-year growth, a pullback like this seems healthy,” Khan said. He also pointed out that year-end selloffs are not uncommon as investors look to offset gains with losses for tax purposes, which may be contributing to the current trend.
While the immediate outlook remains uncertain, analysts suggest that market participants will closely monitor upcoming economic data and central bank signals for signs of stability in both traditional and digital asset markets.
