The cryptocurrency market is experiencing a significant downturn, triggered by the nomination of Kevin Warsh as the next Federal Reserve chair by President Trump. Bitcoin, the leading cryptocurrency, plummeted to a 10-month low, while Ether also experienced a notable drop.
Bitcoin's price fell as much as 2.5% to $74,541, a level unseen since April 2025. This decline also marks the fourth consecutive monthly drop for Bitcoin, the longest losing streak since 2018. As of today, Bitcoin is trading around $76,825.4. Ether, the second-largest cryptocurrency, also faced downward pressure, with prices down around 4%.
The market downturn is attributed to investor concerns over tighter monetary policy under Warsh's leadership. Warsh is viewed as more hawkish, particularly regarding inflation control and balance sheet discipline. This stance suggests potentially tighter financial conditions than previously anticipated, reducing investor appetite for riskier assets like cryptocurrencies. The anticipation of Warsh's leadership has put pressure on the equities market, highlighting investor concerns over increased cost of capital and slowing economic growth.
The crypto market has generally benefited from the Fed's expansive balance sheet, tending to rally when the Fed increased liquidity. Warsh, however, has signaled that he wants a smaller Fed balance sheet. A smaller Fed balance sheet could reduce capital availability for speculative assets.
Adding to the negative sentiment, approximately $1.6 billion in leveraged positions were liquidated as falling prices forced traders to rapidly unwind bullish bets. Thin liquidity, especially during weekend sessions, amplified the losses as key technical breaks triggered stop-loss orders and margin calls, accelerating the drop and increasing volatility.
The broader digital asset market experienced a heavy blow, with roughly $111 billion wiped off the total cryptocurrency market capitalization in the past 24 hours. The recent slump has pushed the Crypto Fear & Greed Index into "Extreme Fear" territory, reflecting panic selling driven by emotions rather than intrinsic value.
Despite the current downturn, some analysts suggest that the market may be approaching a bottom. Historically, periods where Ethereum's Market Value to Realized Value ratio enters the opportunity zone (between -12% and -24%) have marked selling exhaustion, followed by price reversals. However, Pantera warns that only the best-capitalized crypto firms will survive 2026.
While the long-term implications of Warsh's appointment remain uncertain, the immediate impact on the cryptocurrency market is evident. Investors are reassessing their positions and bracing for potential volatility as the market adjusts to the prospect of a more conservative monetary policy.