Crypto Market Faces Sharp Correction as Fed Policy Shift Triggers $1.2B Liquidations

The cryptocurrency market has entered a period of significant volatility following a coordinated sell-off that wiped billions in value from digital assets. Bitcoin retreated from its recent momentum, while altcoins experienced steeper declines, underscoring how interconnected the crypto news cycle remains to broader economic signals. The primary catalyst stems from recent Federal Reserve communications regarding interest rate policy, which shifted investor expectations for the coming year and rattled both traditional and digital asset markets.

Bitcoin Retreats from $100K Milestone While Major Altcoins Plummet

Bitcoin’s attempt to establish itself above the $100,000 threshold proved premature, as the cryptocurrency pulled back to trade near $96,000 before staging a partial recovery. Current market conditions show Bitcoin at $68.13K with a 24-hour gain of 3.66%, reflecting the volatile trading patterns that have characterized the market in recent weeks. The decline from earlier highs represents a 4.8% retraction over a single day, signaling the type of sharp profit-taking that often follows extended rallies.

The broader cryptocurrency market experienced even more severe pressure, with the CoinDesk 20 Index—which tracks the top digital assets by market capitalization—declining more than 10%. Ethereum, the second-largest cryptocurrency by market cap, fell to near $3,500 at its lows, though it has since recovered to $2.05K with a 24-hour gain of 6.95%. Secondary tier assets suffered proportionally greater losses, with Cardano (ADA) down 10.50%, Chainlink (LINK) declining 7.54%, Aptos (APT) shedding 14.97%, Avalanche (AVAX) dropping 9.94%, and Dogecoin (DOGE) falling 8.50% over 24 hours, according to current market data.

The most notable casualty was Solana (SOL), which plummeted to its lowest levels since early November, effectively reversing most of its significant post-election gains from months prior. SOL has since recovered with a 24-hour advance of 7.14%, yet the sharp retracement demonstrated how quickly momentum can evaporate when macro conditions deteriorate.

Federal Reserve Rate Decision Sparks Broad-Based Selloff in Crypto Assets

The primary driver of the recent correction originated from Federal Reserve Chairman Jerome Powell’s communication regarding rate cut expectations for the upcoming year. The Fed’s projection of a slower-than-anticipated pace of interest rate reductions disappointed investors who had grown accustomed to the market’s buoyant sentiment throughout the prior months. Powell’s commentary also emphasized concerns about rising inflation expectations, adopting a more cautious stance than many market participants had anticipated.

Crypto prices had experienced an almost uninterrupted rally since early November, driven by anticipation of favorable regulatory policies under an incoming administration. That relentless upward pressure created conditions ripe for a sharp correction, according to market observers. The Fed’s more hawkish positioning on interest rates provided precisely the catalyst needed to disrupt the momentum, triggering liquidations across leveraged positions and forcing margin calls on extended traders.

The impact extended well beyond cryptocurrency markets. The U.S. dollar index surged above 108, reaching its strongest level since late 2022, as investors rotated toward safe-haven assets. The 10-year Treasury yield simultaneously rose sharply past 4.6%, the highest level since May, indicating a broad repricing of risk assets across financial markets. Traditional equity indices demonstrated resilience, with the S&P 500 and technology-focused Nasdaq recovering to finish modestly higher, yet the underlying volatility remained pronounced.

Market Liquidations and Technical Weakness Signal Caution Ahead

The sudden repricing triggered substantial forced selling in leveraged cryptocurrency derivatives positions. Data from CoinGlass indicated that approximately $1.2 billion in leveraged positions across all cryptocurrency assets faced liquidation within 24 hours following the Fed’s rate decision. Of that total, more than $1 billion represented long positions—wagers that prices would continue to appreciate—which unwound sharply as stop-losses were triggered and margin requirements tightened.

This liquidation cascade created a self-reinforcing cycle of selling pressure. Traders forced to exit positions simultaneously competed to exit at market prices, which accelerated the downward move and triggered additional stop-loss orders. The compressed liquidity conditions typical of year-end market structure exacerbated the volatility, as the cryptocurrency market proved particularly sensitive to rapid shifts in sentiment.

Technical resistance levels now assume critical importance for determining whether the selloff represents a temporary pullback or the beginning of a more substantial corrective phase. Bitcoin must convincingly reclaim and hold above $72,000, followed by $78,000, to signal that the underlying uptrend structure remains intact. Failure to establish support above these levels risks accelerating the selling momentum.

Expert Perspective: Pullback or Correction?

Market analysts offered nuanced perspectives on the implications of the recent price action. Joel Kruger, market strategist at LMAX Group, noted that cryptocurrency investors had grown increasingly nervous about a potential correction following the rapid appreciation through $100,000. “We got that catalyst from the world of traditional markets,” Kruger explained, emphasizing that the fallout from the Fed’s policy stance proved too substantial for the market to ignore.

However, some industry participants contextualized the decline as a healthy development within a broader uptrend. Azeem Khan, co-founder and Chief Operating Officer of the layer-2 network Morph, observed that “when you zoom out and consider the year-over-year growth, a pullback like this feels healthy.” Khan further noted that seasonal tax-loss harvesting activity—where investors liquidate positions with losses before year-end to offset gains for tax purposes—could be contributing to the selling pressure. While difficult to quantify precisely, this structural selling pressure represents a recurring feature of financial markets during the final months of each calendar year.

Joshua Lim, a trader at FalconX, indicated that some market participants were actively chasing the recent technical bounce, rotating capital toward volatile altcoins and options strategies. This pattern suggests that despite the sharp decline, a segment of the cryptocurrency trading community views current prices as potentially attractive entry points rather than a harbinger of further deterioration.

The path forward for cryptocurrency markets remains data-dependent, contingent upon both the trajectory of Federal Reserve policy and the ability of technical support levels to hold. The recent correction has reminded participants that crypto news developments and macro catalysts can rapidly reverse sentiment, underscoring the importance of risk management in this volatile asset class.