The initial upside was driven by a weakening U.S. dollar, which came under additional pressure from remarks by U.S. President Donald Trump. When asked about the sharp decline in the dollar, he said he was comfortable with current levels. These comments supported alternative assets, including digital currencies. However, from midweek onward, the sector resumed its decline, pressured by several negative factors — primarily monetary. At its January meeting, the Federal Reserve kept interest rates unchanged at 3.75%, citing economic stabilization and reduced risks to both inflation and employment. In the subsequent press conference, Fed Chair Jerome Powell noted that borrowing costs could be adjusted in the future if inflation returns to the 2.0% target or if the labor market cools. His comments convinced traders that monetary policy would likely remain unchanged until Powell’s term ends in May, prompting a sell-off in non-dollar assets.
In addition, earlier expectations that Kevin Hassett — known for dovish rhetoric and a crypto-friendly stance — might succeed Powell were dampened after Bloomberg reported that Kevin Warsh, a former Fed governor (2006–2011) and a proponent of tighter monetary discipline and higher borrowing costs, could be appointed instead. Such a move would likely weigh on the crypto market. According to CoinGlass, over the past 24 hours alone, liquidations totaled $1.68 billion, with 93.0% stemming from leveraged long positions, primarily in BTC and ETH. Additional pressure came from a more than 11% drop in Microsoft shares following news of slowing cloud growth, which dragged down the Nasdaq index and triggered sell-offs in gold.
Still, the digital asset sector received some support this week from regulatory developments. On Thursday, the U.S. Senate Agriculture Committee officially approved a bill outlining the structure of the crypto market. However, the measure lacked bipartisan backing, and its progress may slow in the Senate Banking Committee, as Democrats advocate limiting crypto use by public officials — a stance opposed by Trump. The same day, new CFTC Chair Mike Selig and SEC Chair Paul Atkins held a joint event aimed at improving coordination between the agencies. Selig said he instructed staff to work with the SEC on legal provisions classifying digital assets as collectibles and trading instruments, rather than securities.
Overall, sentiment in the cryptocurrency market remains negative, as reflected by continued ETF outflows and the Crypto Fear & Greed Index staying in the “extreme fear” zone at 16. Under these conditions, most assets may continue to decline or move into consolidation next week.
