Negative dynamics in the sector developed under the influence of geopolitical and monetary factors. Assets viewed as alternatives to the US dollar came under pressure amid growing concerns about the possible resumption of direct military conflict between the United States and Iran. On Wednesday, NBC News, citing its sources, reported that President Donald Trump and members of his administration had discussed the possibility of large-scale strikes against Iran, including its energy, infrastructure and nuclear facilities, potentially before the US congressional midterm elections. Axios also reported that the Pentagon had instructed US Central Command to prepare for possible renewed military operations. The risk of further escalation contributed to higher oil prices and increased concerns about another acceleration in inflation, which could reinforce the Federal Reserve's hawkish monetary policy stance. However, President Trump subsequently stated on Truth Social that the United States would not attack Iran before the November 3 midterm elections, citing ongoing diplomatic discussions. This helped ease immediate geopolitical concerns and temporarily stabilised sentiment in the digital asset market, although a significant recovery has yet to materialise.
Nevertheless, expectations of further monetary tightening strengthened following the publication of the minutes from the Federal Reserve's September meeting and recent comments from Federal Reserve Governor Christopher Waller. According to the document, policymakers agreed that the risks of inflation remaining persistently above the 2.0% target were still significant, as economic growth remained relatively resilient and the labour market continued to show signs of stability. Under these conditions, most officials considered another interest rate increase before the end of the year appropriate. On the other hand, incoming economic data point to some moderation in inflationary pressures, reducing the urgency of immediate action. Waller emphasised that further interest rate increases would likely be needed if economic conditions developed as expected, although the timing and pace of tightening remained flexible. As a result, traders continue to anticipate another increase in borrowing costs in December, with the probability of such a move estimated at approximately 84.0%, according to market expectations reflected in the CME FedWatch Tool.
Meanwhile, Ethereum Foundation researcher Justin Drake has urged cryptocurrency holders to begin preparing for potential threats to digital wallet security arising from advances in artificial intelligence (AI). He warned that AI-assisted mathematical breakthroughs could, in a worst-case scenario, undermine the elliptic curve digital signature algorithm (ECDSA) used in cryptocurrency systems within months rather than years. Drake suggested that holders, particularly those with large balances, consider a gradual transition to fresh addresses whose public keys have not previously been exposed through signed transactions. However, no practical attack capable of recovering private keys through such an AI-assisted breakthrough has been demonstrated. The warning has divided the cryptocurrency community, with some experts describing the scenario as overly pessimistic. Others, including Ethereum co-founder Vitalik Buterin, have acknowledged the potential risks associated with AI-driven advances in cryptography while cautioning against rushed wallet migrations, which could themselves lead to financial losses.
Despite the emergence of several new negative factors, sentiment in the digital asset market remains relatively positive. The Crypto Fear & Greed Index stands at 59, remaining in the Greed zone. Under these conditions, the cryptocurrency sector may attempt to resume growth next week or move into a period of consolidation as investors continue to assess geopolitical developments, Federal Reserve policy expectations and institutional demand for digital assets.
