Major digital currencies saw renewed selling as investors processed news about the next Federal Reserve Chair choice and a simultaneous decline in major technology stocks.
Bitcoin fell about 6 percent, trading near $82,600–$83,000 after dropping lower in recent trading. Ethereum was down approximately 6–7 percent, and XRP dropped around 5–6 percent. These drops followed earlier weakness, with the overall digital asset market losing considerable value as macroeconomic expectations shifted.
Key Reason: Kevin Warsh Nominated as Fed Chair
The main cause for the downturn was President Donald Trump’s selection of Kevin Warsh, a former Fed governor, to replace Jerome Powell as the central bank's Chair. Warsh, who served on the Fed Board from 2006 to 2011, has historically favored monetary restraint, including a preference for higher real interest rates and a smaller central bank balance sheet.
These views contrast with the idea of supportive policies that have benefited riskier assets in recent years. A tighter monetary policy—possibly involving slower or fewer rate cuts and a normalization of the balance sheet—typically makes non-yielding assets like cryptocurrencies less attractive. These assets often do well in environments with low interest rates and abundant liquidity.
The dollar strengthened significantly after the announcement, with the DXY index increasing about 0.7 percent in one trading session. This rise in the dollar added more pressure to crypto values, similar to the declines seen in gold and silver, which also fell as real yields appeared set to climb.
Contributing Factor: Big Tech Sell-off
The crypto drop occurred at the same time as sharp losses in leading technology stocks, intensifying a cautious market mood across related assets. One major software and cloud company’s shares plummeted as much as 12 percent after its earnings report indicated slower growth in a key area.
Cryptocurrencies have shown a growing connection with growth-focused tech stocks during times of market stress, as both are considered higher-risk assets sensitive to liquidity conditions and investor willingness to take risks. The combined impact of policy uncertainty and stock market weakness led to widespread selling, with leveraged positions in crypto facing substantial liquidations.
Wider Market Trends and Crypto's Sensitivity
This event shows the changing connection between digital assets and traditional economic factors. Bitcoin, often seen as a hedge against inflation or "digital gold," remains vulnerable to changes in interest rate expectations and central bank liquidity. The prospect of sustained or higher interest rates reduces the cost advantage of holding speculative assets that do not generate income.
Ethereum, which supports decentralized finance, smart contracts, and many blockchain applications, reacted similarly due to its exposure to general market sentiment. XRP, often linked to cross-border payment solutions, experienced parallel selling as investors reduced their holdings in altcoins amid the broader economic uncertainty.
Weekly performance reflected the severity: Bitcoin down roughly 6–7 percent, Ethereum nearing double-digit losses in some periods, and XRP showing similar weakness. The total crypto market value lost tens to hundreds of billions of dollars during the sharpest price movements.
What This Means for Investors and the Future
This widespread decline highlights cryptocurrencies' growth as an asset class linked to global financial conditions. While long-term views on adoption, institutional interest, and technological use continue, short-term price movements are still heavily influenced by Fed policy signals, dollar strength, and stock market trends.
Support levels near recent lows—especially for Bitcoin around the $80,000–$81,000 area— may be tested further if Warsh or other policymakers express more restrictive views. Conversely, any clarification favoring continued easing, positive regulatory news, or a stabilization in tech stocks could help a recovery.
Market participants are continuing to watch economic data, statements from the Fed, and the confirmation process for the new Chair nomination. In the current climate, careful risk management and an understanding of macroeconomic connections are crucial for handling the volatility of digital assets.
The situation remains changeable, with the possibility of quick shifts based on clearer policy direction and overall market sentiment.
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