Cryptocurrency News: How Fed Policy Shift Sparked Late-2024 Market Turmoil

Cryptocurrency markets experienced significant volatility following the Federal Reserve’s December 2024 policy announcement, which projected a notably slower pace of interest rate cuts for 2025. The unexpected hawkish stance triggered a broad-based selloff that reverberated across crypto assets and traditional markets alike. Bitcoin faced sharp selling pressure, while altcoins endured even steeper declines, underscoring how quickly sentiment can shift in digital asset markets.

Federal Reserve Policy Shock Disrupts Crypto Rally

The catalyst for the market disruption emerged from the Federal Reserve’s indication that only two rate cuts would occur in 2025—well below market expectations. Fed Chair Jerome Powell’s comments on inflation concerns rattled investors who had grown accustomed to the cryptocurrency sector’s relentless uptrend following Donald Trump’s presidential election victory in early November. Market participants found themselves caught off guard, as the policy projection contradicted the pro-crypto sentiment that had dominated the preceding weeks.

The timing proved particularly significant: crypto prices had enjoyed a sustained rally built on optimism about potential pro-cryptocurrency policies from the incoming administration. This foundation of bullish sentiment collapsed when traditional market headwinds suddenly shifted market dynamics. The U.S. dollar index surged above 108—its strongest reading since November 2022—while 10-year Treasury yields climbed sharply above 4.6%, levels unseen since May of that year.

Cryptocurrency Assets Face Cascading Selloff

Bitcoin’s attempt to hold above the $100,000 milestone failed decisively during the session, with the leading cryptocurrency sliding to the low $97,000s before further weakness pushed it below $96,000, representing a 4.8% decline over 24 hours. However, altcoin markets absorbed far greater punishment. The broad-market CoinDesk 20 Index plummeted more than 10%, while major alternative tokens suffered pronounced losses:

• Ethereum fell 10.8% to below $3,500
• Cardano (ADA), Chainlink (LINK), Aptos (APT), and Avalanche (AVAX) all experienced 15-20% declines
• Solana (SOL) crashed to its weakest level since early November, nearly erasing its entire post-election rally and surrendering a 26% drop from its recent record high

This disparity between Bitcoin’s resilience and altcoins’ severe underperformance reflected the flight-to-safety dynamic that typically accompanies risk-off sentiment in financial markets.

Liquidation Cascade and Leverage Unwinding

The market turmoil exposed significant leverage embedded throughout cryptocurrency markets. Within roughly 24 hours following the Fed’s rate decision, nearly $1.2 billion in leveraged derivatives positions were forcibly liquidated across all digital assets, according to CoinGlass data. Over $1 billion of those liquidations involved long positions—bets that prices would continue rising—which suggests traders had positioned aggressively for continued upside momentum.

These cascading liquidations created a self-reinforcing dynamic: as positions were closed at any price, selling pressure intensified, triggering further liquidations and compounding the market’s decline. The episode served as a stark reminder that leverage amplifies both gains and losses in cryptocurrency markets.

Professional Perspectives on Market Correction

Market strategists offered varying interpretations of the selloff’s significance. Joel Kruger, a market strategist at LMAX Group, observed that “the crypto market had been on pins and needles around the possibility for a correction following the record run through $100,000,” and that “the fallout from the Fed decision provided precisely that catalyst.”

In contrast, Azeem Khan, co-founder and COO of layer-2 network Morph, positioned the pullback within a longer-term context. “When you zoom out and consider year-over-year growth, a correction like this feels healthy,” Khan noted in analysis shared with CoinDesk. He further highlighted that year-end tax-loss harvesting—where investors deliberately realize losses to offset gains for tax purposes—could be contributing to additional selling pressure beyond pure fundamental concerns.

Market Recovery and Forward Outlook

Despite the short-term turmoil of late 2024, subsequent cryptocurrency performance has offered more constructive signals. Recent data from early 2026 shows notable recovery across major assets: Bitcoin trades at $67.96K with 3.75% gains, Ethereum recovered to $2.05K (+7.62%), while alternative tokens including ADA, LINK, APT, AVAX, DOGE, and SOL all posted solid double-digit percentage gains over 24-hour periods.

However, analysts caution that medium-term conditions remain complex. Fragile macroeconomic conditions, stagnant stablecoin supply growth, and the persistent risk of cascading liquidations below critical support levels all suggest cryptocurrency markets retain vulnerability despite near-term recovery bounces.

The 2024 experience demonstrated that cryptocurrency markets, despite their maturation, remain tightly correlated with traditional financial sentiment and highly sensitive to policy shifts from major central banks. The relationship between Fed policy and digital asset performance ensures that cryptocurrency investors must maintain awareness of macroeconomic developments and traditional market dynamics.