The cryptocurrency market experienced a major drop, losing more than $850 million due to liquidations. This event followed the Federal Reserve’s announcement of a 25 basis point reduction in its benchmark policy rate.
Although markets anticipated a modest rate cut, Federal Reserve Chair Jerome Powell’s indications of a conservative approach to future rate adjustments in 2025 spurred market uncertainty and widespread sell-offs.
Bitcoin crash wipes out nearly 300,000 cryptocurrency traders
During a press conference, Powell noted that while inflation has been declining “steadily,” its decline has been “slower than expected.” Consequently, the Federal Reserve revised upward its 2025 inflation forecast to 2.5%, suggesting a possible tightening of economic conditions that could restrict liquidity in financial markets, including cryptocurrencies.
“Inflation has moved toward the Committee’s 2 percent target, but remains somewhat elevated. “The economic outlook is uncertain and the Committee is alert to the risks to both sides of its dual mandate,” the Federal Reserve said in a news release.
This change in monetary policy caused a sharp drop in Bitcoin, which fell below $99,000, a drop of more than 8% from its all-time high of $108,000. Similarly, the broader crypto market, including major coins like Ethereum (ETH), suffered significant losses.
According to Coinglass, the last 24 hours saw a staggering loss of $869.39 million through liquidations, with $749.59 million of long positions and $119.80 million of short positions. In particular, altcoins were hardest hit by the impact, accounting for more than $222 million of liquidated assets.
Cryptocurrency settlements. Source: Coinglass
Amid these market movements, a total of 299,335 traders were caught off guard. The largest liquidation order occurred on Binance, involving an Ethereum trade worth $7 million.
Despite these setbacks, sentiment among cryptocurrency traders remains surprisingly resilient. The cryptocurrency fear and greed index is currently at 75, reflecting a strong bullish outlook amid market volatility. This sentiment highlights the continued appeal of cryptocurrencies as an investment, even in turbulent times.
Reinforcing this optimism, Bitcoin-related investment vehicles recorded notable inflows. BlackRock’s iShares Bitcoin Trust, for example, saw $359.6 million in new investments on Wednesday alone. Meanwhile, the combined inflow of all spot Bitcoin ETFs reached $275.3 million.
These developments, reflecting a cautious Federal Reserve and a bullish crypto market, demonstrate a complex interplay between macroeconomic policies and crypto markets. Investors appear to be protecting themselves against economic uncertainty by strengthening their holdings in digital assets, which, despite their inherent volatility, are perceived as a viable strategy for portfolio diversification.
Recent market activity highlights the influence of US monetary policy on the crypto sector. As the Federal Reserve continues to face inflation-related challenges, the cryptocurrency market’s response remains rapid and pronounced.
