Bitcoin plunges below $79,000, and cryptocurrencies suffer sharp losses
The cryptocurrency market experienced a sudden and sharp sell-off, with digital assets suffering losses exceeding 12.7% of their total value over the past seven days. This steep decline coincides with similar crashes in precious metals markets, particularly gold and silver, reflecting a growing risk aversion among investors.
In recent trading, Bitcoin, the world's largest and most important cryptocurrency by market capitalization, broke through a key psychological support level and settled below $79,000, registering a 5.02% decline. Alternative cryptocurrencies were not immune to this downward trend, with Ethereum falling by approximately 9% to reach $2,445.31, while Solana suffered even greater losses of 9.9%, trading at $105.50.
The impact of the Federal Reserve nominations and the strength of the dollar
This dramatic decline is directly linked to political and economic developments in the United States, specifically President-elect Donald Trump's announcement of his selection of Kevin Warsh to succeed Jerome Powell as Chairman of the Federal Reserve (the US central bank). The markets reacted to this news in a way that significantly strengthened the US dollar.
Analysts believe that Warsh's appointment helped to alleviate concerns about the central bank's independence, giving a significant boost to the greenback. It is a well-established economic principle that there is a historical inverse relationship between the strength of the dollar index and the prices of high-risk assets such as cryptocurrencies, as well as traditional safe havens like gold. When the dollar rises and US Treasury yields become more attractive, investors tend to liquidate their digital and gold holdings and move into the US currency.
Economic context and market expectations
These moves come at a highly sensitive time for global financial markets, as individual and institutional investors try to gauge the economic direction of the new US administration. The synchronized decline in gold, silver, and cryptocurrencies clearly indicates a shift in risk appetite, with Bitcoin no longer serving as an inflation hedge amid expectations of either tighter or more stable monetary policies under Warsh's leadership.
Analysts are watching the coming days with caution, as the continued strength of the dollar could put further selling pressure on the crypto market, unless new catalysts emerge to restore investor confidence in digital assets.
