Cryptocurrency markets experienced a sharp and violent decline today, with Bitcoin plummeting to a 10-month low of $74,546.46 . Altcoins were not immune to this downturn, with Ethereum falling to its lowest level since June 22nd, reaching $2,166.79 . This decline reflects investor anxiety, resulting in a 3.68% drop in the total market capitalization of cryptocurrencies, settling at approximately $2.57 trillion, of which Bitcoin alone accounts for roughly $1.5 trillion.
The impact of political appointments and the strength of the dollar
This significant decline is closely linked to political and economic developments in the United States, specifically President Donald Trump's announcement of his nominee for Chairman of the Federal Reserve (the US central bank). Trump selected Kevin Warsh to succeed Jerome Powell, a move interpreted by markets as a reinforcement of the central bank's independence and monetary policy.
This announcement immediately strengthened the US dollar against a basket of other currencies and assets. Historically and economically, there is an inverse relationship between the strength of the dollar and the prices of high-risk assets such as cryptocurrencies; the more attractive the dollar becomes as a safe haven and investment return, the less appetite investors have for volatile assets, which explains the massive selling pressure the market experienced.
Widespread losses in the market
The decline wasn't limited to Bitcoin and Ethereum; most major cryptocurrencies were in the red. According to data from CoinMarketCap, the following cryptocurrencies experienced significant drops:
- Ripple (XRP) has declined by approximately 6.8%.
- The Solana currency fell by 5.8%.
- The BNB coin fell by 4.96%.
The data indicates that Bitcoin has lost more than 14% of its value in just one week, reflecting the continued decline in risk appetite among major investment portfolios.
Broader economic context: Gold, silver, and position liquidation
What is happening in the crypto market cannot be separated from the general economic landscape, as this decline coincided with similar collapses in the prices of precious metals such as gold and silver, confirming the trend of global liquidity towards the US dollar in light of the new expectations for monetary policy.
It is worth noting that the cryptocurrency markets experienced one of their worst daily losses last Saturday, with more than $1 billion in net long and short positions being liquidated, leaving the market in a state of fragility and anticipation of any significant news, which is exactly what happened with the announcement of Warsh’s nomination to the Federal Reserve.
