The positive momentum was likely technical in nature, since there were no major structural or fundamental reasons for the digital sector to regain strength. Analysts therefore believe another “bull trap” may be forming, when a temporary rebound in assets is perceived by investors as the start of a new uptrend, only to be followed by a reversal and renewed downside. A similar pattern was already seen in January and March, when BTC gained nearly 8.0% but lost all of those gains within just two weeks. At present, geopolitical and monetary factors continue to dominate. The escalation of the US-Iran conflict is ongoing, and yesterday the US Department of Defense requested an additional $200.0 billion in military spending. Moreover, Israeli Prime Minister Benjamin Netanyahu stated that a ground operation may be necessary, which could further intensify the situation. Over the past few days, the sides have inflicted significant damage on oil and gas facilities in Iran, Qatar, and Saudi Arabia, further supporting oil prices and creating new pressure on risk assets, including digital ones. The probability of accelerating global inflation and an economic slowdown is increasing, as a result of which major central banks are likely to maintain restrictive monetary policy for longer or even tighten further. On Wednesday, Federal Reserve officials hinted at that possibility by keeping the interest rate in the 3.50–3.75% range and raising their inflation forecast from 2.4% to 2.7%. Fed Chair Jerome Powell stated that rising energy prices amid the US-Iran confrontation would affect the pace of consumer price growth, although there is still not enough data to assess the scale and duration of the potential economic impact. Nevertheless, the dot plot showed that most policymakers now expect only one rate cut in 2026, rather than two as previously.
Against this backdrop, overall sentiment across the crypto sector remains negative, which is reflected in institutional investors continuing to withdraw funds from exchange-traded digital funds. Meanwhile, the Fear & Greed Index, after a brief recovery, has slipped back to 11 in the “extreme fear” zone.
Among the positive developments, it is worth highlighting the release of special guidance from the Commodity Futures Trading Commission (CFTC) and the US Securities and Exchange Commission (SEC), confirming that most cryptocurrencies are not considered securities under federal law, and that only one class of assets falls under these legal provisions — traditional securities that have been tokenized. It is also worth noting that Ethereum developers have moved to testing the Fast Confirmation Rule (FCR), which could reduce blockchain transaction confirmation times to 13.0 seconds, or 98.0% less than is currently required, potentially attracting new users.
Overall, conditions in the digital sector remain difficult, and under these circumstances, most major cryptocurrencies may continue to decline or shift into consolidation next week.
