Market Turmoil: Crypto Prices Plunge Amid Fed Decisions
The cryptocurrency market faced a sharp downturn on Thursday, with the total market capitalization dropping over 1% from $3.04 trillion to $2.98 trillion within 24 hours. This decline erased more than $60 billion from the market amid widespread selloffs.
Bitcoin (BTC) saw its gains evaporate, falling back to the $87K level, with the upcoming $8.5 billion BTC options expiry on Friday potentially pushing prices lower. Earlier, CoinGape had warned of a potential Bitcoin price crash.
Ethereum (ETH) also lost its upward momentum, dropping over 2% to $2,934 under heavy selling pressure. Major altcoins like XRP, SOL, DOGE, ADA, HYPE, and WLD experienced substantial profit-taking after the US Federal Reserve maintained steady interest rates and Chair Jerome Powell adopted a hawkish tone.
The Crypto Fear & Greed Index declined from 29 to 26, reflecting diminishing trader confidence.
Fed's Interest Rate Pause and Market Impact
The US Federal Reserve opted to keep interest rates unchanged post-FOMC meeting, signaling a pause in rate adjustments. The decision was supported by a 10-2 vote among Fed officials, with Stephen Miran and Chris Waller advocating for a 25 basis point cut. The committee will continue evaluating data to guide future monetary policy.
Fed Chair Jerome Powell emphasized that a rate hike is not currently anticipated. Future rate cuts depend on labor market conditions. The CME FedWatch Tool indicates that markets are factoring in steady rates at the March FOMC meeting.
The US dollar index (DXY) held above 96 following Treasury Secretary Scott Bessent's dismissal of US intervention to support the Japanese yen. Meanwhile, the US 10-year Treasury yield slightly increased to 4.265%.
These uncertainties contributed to the crypto market downturn, with traders adopting a cautious stance, affecting BTC and ETH prices.
Crypto Market Liquidations Surge
CoinGlass reported nearly $350 million in liquidations of major cryptocurrencies over the last 24 hours, impacting over 118K traders. The largest BTC liquidation occurred on Hyperliquid, valued at $31.64 million.
Long positions suffered $250 million in liquidations, while short positions accounted for $100 million. In just one hour, $105 million in long positions were liquidated.
BTC, ETH, XAU, HYPE, SOL, WLD, XRP, RIVER, ENA, ZEC, DOGE, JTO, and SUI were the most liquidated. Worldcoin's price briefly surged due to OpenAI's exploration of a biometric social media platform but soon fell back.
On-Chain Indicators Suggest Further Challenges
Glassnode noted that BTC is consolidating with low trading volumes and a gradual rebuilding of spot interest, while options traders remain bearish. Long-term Bitcoin holders have sold approximately 143,000 BTC over the past month, marking the fastest selling pace since August.
Options worth $8.5 billion are set to expire on Friday, with a put-call ratio of 0.56. The max pain price is $90,000, indicating traders are hedging against potential declines.
Santiment highlighted notable outflows from Bitcoin ETFs ahead of the Fed's rate decision. Over the last seven trading days, spot BTC ETFs recorded $1.86 billion in net outflows, with notable money flows and trading volumes in ETH, XRP, and SOL.
Bitcoin ETFs experienced $19.6 million in net outflows on Wednesday, led by BlackRock's Bitcoin ETF (IBIT) with $14.2 million. Capital is shifting from crypto to equities, gold, and metals.
Analyst Ted Pillows observed a continued decline in the Coinbase Bitcoin Premium, indicating institutional investors are diversifying away from BTC.