Bitcoin Teeters on the Brink of $70,000 as Fed Nominee Sparks Crypto Rout
SINGAPORE/LONDON (Reuters) – Cryptocurrency markets faced a fresh wave of selling pressure on Thursday, with Bitcoin threatening to breach the psychologically critical $70,000 threshold. The downturn, which analysts linked directly to shifting U.S. monetary policy expectations, has reignited concerns about the sector's vulnerability to tighter liquidity.
In early European trading, Bitcoin was down 2%, having slumped as much as 3.5% during the Asian session to $70,052.38. This marks its weakest level since late 2024. The second-largest digital asset, Ether, also fell 0.7% to $2,111.34, perilously close to dropping below $2,000 for the first time since May of last year.
The catalyst for the sharp decline appears to be the nomination of Kevin Warsh as the next Chair of the Federal Reserve. Market participants interpret his potential appointment as a signal that the central bank may aggressively shrink its balance sheet, a move that would drain liquidity from financial markets. "Cryptocurrencies have flourished in an era of abundant liquidity," noted Manuel Villegas Franceschi of Julius Baer's next-generation research team. "A hawkish Fed committed to quantitative tightening removes a fundamental tailwind. The market fears a hawk with him."
The sell-off extends a painful run for digital assets. Bitcoin has fallen over 7% this week alone, bringing its year-to-date losses to nearly 20%. Ether's performance has been even more stark, down roughly 30% since January. This weakness continues a trend that began after last October's historic crash, which shattered investor confidence and left market sentiment fragile.
Institutional behavior is compounding the pressure. Analysts at Deutsche Bank pointed to massive, sustained withdrawals from cryptocurrency exchange-traded funds (ETFs) as a key driver. "We believe this broader decline is mainly driven by massive withdrawals from institutional ETFs," they wrote in a client note. U.S. spot Bitcoin ETFs saw outflows exceeding $3 billion in January, following outflows of about $2 billion and $7 billion in December and November, respectively. "This steady selling signals that traditional investors are losing interest, and overall pessimism about crypto is growing."
Market Voices:
"This is a necessary correction, flushing out the excess leverage from last year's rally. The long-term thesis for blockchain technology remains intact, but the market is rightly repricing assets for a higher-rate environment." – David Chen, Portfolio Manager at Horizon Digital Assets.
"It's the same old story: crypto as a speculative bubble deflating the moment the free money tap looks set to turn off. The 'digital gold' narrative collapses when it behaves like a hyper-volatile tech stock, entirely at the mercy of Fed policy whispers." – Maya Rodriguez, Financial Analyst and frequent crypto skeptic.
"The ETF outflows are terrifying. It means the so-called 'institutional adoption' wave is receding as fast as it came. If the big players are heading for the exits, what does that leave for retail investors holding the bag?" – Alex "CryptoBear" Johnson, independent trader and newsletter publisher.
"Volatility is a feature, not a bug. Short-term price action driven by macro news doesn't change the on-chain fundamentals or adoption curve. This is a buying opportunity for those who understand the cycles." – Sarah Lin, Founder of a Web3 venture studio.
(Reporting by Rae Wee; Editing by Edwina Gibbs and Joe Bavier)