Although markets had priced in a near-term easing, Federal Reserve Chair Jerome Powell’s remarks reversing rate-cut expectations precipitated a sharp sell-off in Bitcoin, driving prices through key technical supports. The announcement, delivered during a Fed meeting, dashed market hopes for imminent interest rate reductions that had been building as inflation signs showed tentative improvement, and the immediate effect was a pronounced shift from optimism to caution among traders. Bitcoin, which had been trading around $114,600 ahead of the statement, experienced rapid intraday volatility, with prices collapsing past established support zones and breaching the $108,000 level in a concentrated move. The drop constituted a swift correction exceeding 5% within a short time frame, representing one of the steeper single-day declines seen in recent months.
Powell’s reversal sent Bitcoin plunging through key supports, sparking rapid intraday volatility and over 5% losses.
The technical breakdown triggered a cascade of forced liquidations across crypto markets, with more than $800 million wiped out as overleveraged positions were closed. Liquidation events concentrated in highly leveraged futures and margin accounts amplified the downward pressure, creating a feedback loop in which falling prices generated further margin calls and sales, and both retail and institutional participants faced sudden balance shortfalls. Exchanges reported multi-month highs in liquidation volumes and elevated trading activity, as stop-losses were executed and risk-off positioning intensified, highlighting the fragility of leveraged structures in volatile environments.
Price effects extended beyond Bitcoin, as correlated declines appeared across major altcoins and broader market indices, with Ethereum declining by nearly 2% and many tokens following suit, underscoring systemic sensitivity to macro policy shifts. A small number of assets exhibited isolated gains driven by idiosyncratic news, but the overall tone became more defensive, reflecting reduced appetite for high-volatility holdings when central bank signals tighten monetary expectations. Analysts noted that Fed policy influences opportunity costs and risk tolerance, so a reversal of rate-cut bets tends to strengthen the dollar and pressure USD-denominated crypto valuations.
The episode served as a reminder of the close linkage between macroeconomic policy and crypto market dynamics, and it suggested that volatility will likely remain elevated until clearer guidance emerges from the Fed and inflation data stabilizes. This event also underscores the dangers of margin trading in crypto, where amplified losses through leverage can rapidly lead to forced liquidations and significant financial damage.
