Cryptocurrencies have encountered a massive wave of selling! The ripple effects from Kevin Warsh's nomination as the next Federal Reserve Chairman are continuing to spread and reshape multiple asset classes. Following the historic plunge in gold and silver, major cryptocurrencies like Bitcoin and Ethereum experienced a sharp downturn over the weekend. Within the past 24 hours, Bitcoin's price fell by over 7%, breaching the $80,000 level, while Ethereum plummeted by more than 11%. Data from Coinglass reveals that over the last 24 hours, more than $2.5 billion in cryptocurrency futures positions were liquidated across the market, affecting a staggering 420,000 traders, with over 90% of these being long positions.
Analysts point out that some investors and traders are concerned that Kevin Warsh might tighten the cash supply within the financial system, which would exert pressure on the cryptocurrency market. The digital asset space has just endured a "bloodbath" in the past 24 hours. Bitcoin saw a significant decline, with its intraday drop exceeding 7% at one point, dipping to a low of $76,000. Ethereum, the second-largest cryptocurrency, fell over 11%, touching a low of $2,256. Other smaller market-cap cryptocurrencies also experienced substantial drops.
This sell-off wiped out more than $110 billion from the total market capitalization of cryptocurrencies within a 24-hour period. As of the latest updates, Bitcoin was down nearly 6% to around $79,000, Ethereum had fallen over 9% to $2,459, Solana dropped 10%, BNB declined over 8%, Cardano fell more than 7%, and XRP was down over 4%. Coinglass data indicates that $2.561 billion in crypto futures were liquidated in 24 hours, with 423,500 traders liquidated. Long position liquidations accounted for $2.407 billion, while short position liquidations totaled $154 million.
The largest single liquidation order occurred on Hyperliquid-ETH-USD, valued at $222 million. This cryptocurrency decline happened against a backdrop of thin liquidity and limited buying interest. Simultaneously, the US Dollar strengthened following the nomination of former Fed Governor Kevin Warsh as the next Federal Reserve Chairman. Some market participants worry he may restrict cash flow in the financial system.
This pullback has intensified weeks of macro disappointment among investors regarding Bitcoin. Previously, Bitcoin failed to respond to a series of market dynamics that should have supported the asset. The US Dollar weakened for most of January, yet this movement did not boost sentiment in the crypto market. Similarly, Bitcoin showed no substantial reaction even as gold prices surged to record highs.
Following a significant retreat in gold and silver prices on Friday, Bitcoin still could not attract capital inflows. The persistent weakness in Bitcoin demand raises questions about its role in a broader investment portfolio. Once viewed as a momentum trade and a hedge against currency devaluation, Bitcoin is now struggling to fulfill either function. Continued outflows from spot ETFs, a lack of demand stimulation from geopolitical risks, and traditional safe-haven flows concentrating in precious metals and cash all contribute to the pressure.
Needham analyst John Todaro stated, "The current price level reflects extremely low interest from retail investors," adding that trading volumes could remain subdued for the next "quarter or two." Brian Jacobsen, Chief Economist at Annex Wealth Management, commented that the Fed's "bloated balance sheet combined with aggressive bank regulation" has trapped liquidity on Wall Street instead of flowing into the real economy, which previously fueled bubbles in assets like bonds, crypto, metals, and meme stocks.
Since last year's crash, cryptocurrencies have struggled to find direction, lagging behind the significant rallies seen in gold and equities. Jacobsen noted, "Sometimes these price adjustments become self-reinforcing. It's possible, even likely, to see more selling in the coming days." The relationship between Kevin Warsh and cryptocurrency is complex. On the evening of January 30th, US President Trump nominated Kevin Warsh for Fed Chairman.
The 55-year-old Warsh, a former investment banker, served on the Federal Reserve Board of Governors from 2006 to 2011, becoming the youngest governor in the institution's history. The Fed's policy decisions are crucial for the crypto market because cryptocurrencies often exhibit characteristics of "risk-on" investments. When interest rates are high, safer yields from assets like US Treasuries become more attractive, diverting capital that might have flowed into high-volatility assets like crypto.
Conversely, lower rates increase liquidity in the financial system and often push investors towards higher-risk areas. Historically, a stronger US Dollar, which typically accompanies Fed tightening policies, also puts downward pressure on Bitcoin's price. Shady El Damaty, CEO and Co-founder of Holonym, believes Warsh is perceived as more "hawkish" than Powell, especially considering his past criticism of quantitative easing and the expansion of the Fed's balance sheet.
"This raises concerns about how aggressive he might be on interest rate policy if inflation resurges. For crypto, the real issue right now is uncertainty. No one knows if he will act on these views, especially in an election year where the pressure to maintain liquidity will be immense," Damaty added. Damaty said, "If market nerves persist, it could slow the flow of risk-on capital into crypto in the short term. In the long run, a more hawkish Fed leadership might actually strengthen crypto's narrative, particularly for Bitcoin as a hedge against monetary tightening and centralized currency control."
According to foreign media reports, Kevin Warsh's views on cryptocurrency are nuanced. In a 2022 commentary, Warsh described many private cryptocurrency projects as "fraudulent" and "worthless," writing, "Crypto is a misnomer because it is software, not money." Warsh has said, "I doubt that the multitude of private cryptocurrencies are robust and reliable enough to serve as substitutes for the US Dollar. I also doubt that imposing bank-like regulation on private stablecoins would ensure their stability during stress periods without government bailouts."
More recently, Warsh has appeared somewhat more conciliatory towards Bitcoin. In a May interview with the Hoover Institution, he stated that Bitcoin "doesn't keep me up at night" and described it as an important asset that could serve as a check on policymakers.
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