- Crypto Markets saw a liquidation of over $200 million in an hour, in a statement from Powell’s Hawkish.
- Bitcoin (BTC) recovered above $117,000 after a temporary soak of less than $116,000, exceeding $116,000.
- The US Federal Reserve stabilizes interest rates, and Powell cites potential inflationary pressures from tariffs.
The wave of volatility that swept the cryptocurrency market on Wednesday was swept as Hawkish’s remarks about inflation and tariffs from Federal Reserve Chair Jerome Powell sent scramblings to leveraged traders.
A sudden market tremor caused more than $200 million in an hour, with Bitcoin shortly below $116,000.
As expected, the US Central Bank left unchanged benchmark interest rates with the latest policy decisions.
However, it was Chair Powell’s subsequent comments that attracted the full market attention. He argued that inflationary pressures could re-emerge, particularly due to the effects of trade tariffs.
This cautious attitude was maintained even as two Federal Reserve officials opposed the decision and showed their preference for immediate interest rate cuts.
The crypto market’s response to Powell’s Hawkish tone was quick and sharp. According to Coinglass data, during the time he spoke, liquidation of leveraged positions rose to more than $200 million on all digital assets.
Bitcoin (BTC) is feeling immediate pressure, falling below $116,000.
However, the sale proved to be short-lived. Later in the session, Bitcoin was able to bounce back over $117,000, but it still fell 0.8% that day, continuing to trade at the bottom of the close range for three weeks.
Ether (ETH) experienced a similar whip horse, initially sliding 3% before recovering to trade for $3,750, ending the period with a modest loss of 0.6% over the past 24 hours.
Altcoins initially posted an even more sharp decline by reducing losses before Solana’s Sol, Avalanche’s Avax and Liperliquid hype tokens all fell by 4%-5%.
Meme coins like Bonk and Pengu each plummeted by 10%.
This volatility in the crypto space is in contrast to the positive development of traditional stock markets, with Tech Giants Meta (META) and Microsoft (MSFT) recording strong quarterly revenues, increasing inventory by 10% and 6% respectively.
“Behind the curve”? Analysts see the Fed’s pivot on the horizon
Despite Powell’s careful rhetoric, some market analysts believe the Federal Reserve may be misinterpreting the economic landscape.
“The market is increasingly beginning to wonder if the Fed is behind the curve,” commented Matt Mena, an analyst at Digital Asset Issuer 21Shares, in a market note.
“Last week’s PCE (Personal Consumption Expense) print marked a second soft reading in a row, weakening consumer spending,” writes Mena.
Such harsh policy risks are strained by a wider slowdown as unemployment rates are higher and actual yields remain limited.
MENA suggests that the current market setup is reminiscent of the last quarter of 2023. It features a period characterized by a “Fed constrained by softening inflation, increasing political volatility, and delayed indicators.”
He argued that the Federal Reserve will ultimately pivot to eventually lower interest rates.
For now, however, the market remains trapped between the Fed’s current Hawkish attitude and growing expectations for the ultimate, perhaps necessary policy change.
