The US Federal Reserve held interest rates steady, with Powell citing potential inflationary pressures from tariffs.
A wave of volatility swept through the cryptocurrency markets on Wednesday, as Federal Reserve Chair Jerome Powell’s hawkish remarks on inflation and tariffs sent leveraged traders scrambling.
The sudden market tremor resulted in over $200 million in liquidations in a single hour, with Bitcoin briefly dipping below the $116,000 mark.
The US central bank, as expected, left its benchmark interest rates unchanged in its latest policy decision.
However, it was Chair Powell’s subsequent comments that captured the market’s full attention. He insisted on the potential for inflationary pressures to re-emerge, particularly from the impact of trade tariffs.
This cautious stance was maintained even as two Federal Reserve officials dissented from the decision, signaling their preference for an immediate rate cut.
The crypto market’s reaction to Powell’s hawkish tone was swift and sharp. In the hour that he spoke, liquidations of leveraged positions spiked to over $200 million across all digital assets, according to data from CoinGlass.
Bitcoin (BTC) felt the immediate pressure, dipping below $116,000.
However, the sell-off proved to be short-lived. Later in the session, Bitcoin managed to bounce back above $117,000, though it was still down 0.8% for the day and continued to trade at the lower end of its tight, three-week range.
Ether (ETH) experienced a similar whipsaw, initially sliding by as much as 3% before recovering to trade at $3,750, ending the period with a modest loss of 0.6% over the past 24 hours.
Altcoins initially posted even steeper declines, with Solana’s SOL, Avalanche’s AVAX, and Hyperliquid’s HYPE tokens all dropping by 4%-5% before paring their losses.
Meme coins like BONK and PENGU plunged by as much as 10% each before also bouncing back.
This volatility in the crypto space contrasted with positive developments in the traditional stock market, where tech giants Meta (META) and Microsoft (MSFT) posted strong quarterly earnings, lifting their stocks by 10% and 6%, respectively, in after-hours trading.
Despite Powell’s cautious rhetoric, some market analysts believe the Federal Reserve may be misjudging the economic landscape.
“The market is increasingly starting to think the Fed may be behind the curve,” commented Matt Mena, an analyst at digital asset issuer 21Shares, in a market note.
“Last week’s PCE [Personal Consumption Expenditures] print marked the second soft reading in a row, and consumer spending is weakening,” Mena wrote.
With unemployment edging higher and real yields still restrictive, maintaining such tight policy risks overtightening into a broader slowdown.
Mena suggested that the current market setup is reminiscent of the last quarter of 2023, a period characterized by “softening inflation, rising political volatility, and a Fed constrained by lagging indicators.”
He argued that “the stage is set” for the Federal Reserve to eventually pivot to lower interest rates, a move that he believes could be a powerful catalyst for Bitcoin, potentially driving its price to $150,000 by the end of the year.
