Crypto Markets Tumble Amid Hawkish Fed Signals, ETF Outflows
The cryptocurrency market opened the week deep in the red, continuing a sell-off triggered by shifting U.S. monetary policy expectations and cooling institutional demand. The global market capitalization shed 2.9% over the past 24 hours, retreating to approximately $2.65 trillion, with 91 of the top 100 digital assets by market cap posting losses.
Bitcoin (BTC), the flagship cryptocurrency, declined 2.1% to trade around $76,472, breaching key psychological levels. Ethereum (ETH) faced steeper pressure, tumbling 7.2% to $2,225. The broader downturn pushed the Crypto Fear & Greed Index into "Extreme Fear" territory, registering a score of 18.
Analysts point to a confluence of factors driving the downturn. "The nomination of Kevin Warsh as the new Federal Reserve Chair, coupled with a hotter-than-expected Producer Price Index report, triggered a hawkish shock across risk assets," noted a report from blockchain analytics firm Glassnode. Warsh, known for his inflation-wary stance, is perceived as less likely to support rate cuts in the near term.
This macro shift was reflected in institutional flows. U.S. spot Bitcoin ETFs witnessed substantial outflows of $509.7 million on Friday, January 30th, with BlackRock's fund alone seeing over $528 million exit. Spot Ethereum ETFs also bled $252.87 million. The sustained outflows have pushed the average cost basis for many ETF buyers above current prices, leaving them "underwater."
"We remain in corrective Wave IV," said John Glover, Chief Investment Officer at Ledn, referencing Elliott Wave Theory. "We look for this to complete between $71,000 and $84,000 before a potential Wave V advance begins, likely not until Q2." Glover suggests the next major bullish phase could target $140,000 to $165,000 for Bitcoin, contingent on the market holding above $67,000.
The sell-off has turned holdings unprofitable for major corporate holders. Michael Saylor's MicroStrategy, with an average Bitcoin purchase price of $76,037, now faces an unrealized loss exceeding $900 million on its 712,647 BTC stash.
Market Voices:
"This is a healthy correction and a buying opportunity for those with a long-term horizon. The fundamental thesis for institutional adoption hasn't changed," said David Chen, a portfolio manager at Horizon Digital Assets.
"The ETF golden goose has stopped laying eggs. The narrative has flipped from 'infinite institutional demand' to 'profit-taking and fear.' We're testing the resilience of the post-ETF market structure," commented Anya Sharma, a research lead at Decentral Park Capital.
"It's a bloodbath fueled by a clueless administration appointing a Fed chair from the stone age. They're sacrificing innovation at the altar of outdated inflation models. Retail is getting slaughtered while the whales sold the top," ranted Marcus "CryptoRage" Thorne, an independent trader and popular streamer.
"The correlation with traditional markets is back. This isn't just crypto-specific; it's a broad risk-off move. Patience and position sizing are key here," advised Dr. Evelyn Reed, a financial sociologist at Cornell University.
Technical charts suggest further downside potential, with Bitcoin eyeing possible support near $72,400 and Ethereum risking a fall below the $2,000 mark. As market participants digest the new macro reality, the short-term trajectory appears bearish, with all eyes on upcoming economic data and Fed commentary for directional cues.