Federal Reserve Chair Jerome Powell’s hawkish comments on interest rate cuts have triggered a ripple effect across global financial markets, leading to a sharp decline in cryptocurrency prices.
Following Powell’s remarks, crypto markets continued their downward trajectory on Thursday. Bitcoin (BTC) briefly held above $100,000 before succumbing to selling pressure, dropping to the low-$97,000 range during U.S. trading hours. A modest recovery to $98,000 was short-lived, with BTC sliding below $96,000, marking a 4.8% decline over the past 24 hours.
Altcoins faced even harsher declines, with the CoinDesk 20 Index plummeting over 10%. Ethereum (ETH) slipped 10.8% to trade below $3,500, while Cardano’s ADA, Chainlink’s LINK, Aptos’ APT, Avalanche’s AVAX, and Dogecoin’s DOGE recorded losses ranging from 15% to 20%. Solana’s SOL suffered one of the steepest drops, plunging 26% from its recent peak and erasing nearly all gains from its post-election rally.
Data from CoinGlass indicates that approximately $1.2 billion worth of leveraged crypto derivatives positions were liquidated in the past 24 hours, with long positions accounting for over $1 billion of the total.
Traditional financial markets mirrored the volatility. While U.S. stock indexes initially rebounded from Wednesday’s lows, gains were limited. The S&P 500 and Nasdaq ended the session with modest 0.5% increases.
The broader selloff across markets came after Powell signaled a slower-than-anticipated pace of interest rate cuts for 2024 and expressed ongoing concerns about inflation. These remarks dampened investor enthusiasm, leading to declines across cryptocurrencies, 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 spiked above 4.6%, hitting their highest point since May.
“Bitcoin’s climb above $100,000 had already placed the market in a precarious position for a correction,” said Joel Kruger, market strategist at LMAX Group. “The Fed’s decision and Powell’s comments served as the tipping point.”
Azeem Khan, co-founder and COO of layer-2 network Morph, provided a more optimistic outlook. “Zooming out, this pullback seems like a natural correction after significant year-over-year growth,” Khan noted. He also highlighted the historical pattern of year-end selloffs driven by investors balancing gains and losses for tax purposes.
Market participants are now expected to closely monitor economic data and signals from central banks, with hopes for renewed stability in both traditional and cryptocurrency markets.
