Crypto Selloff Deepens Amid Fed Hawkishness, Key Data Ahead

The catalyst for the weekend’s sharp selloff was the appointment of Kevin Warsh as the new Federal Reserve chair by President Donald Trump. Market participants view Warsh as hawkish on inflation, interpreting his stance as a signal that the central bank may not cut interest rates as quickly or as deeply as previously anticipated. This shift in expectations has created a wave of uncertainty, particularly for risk assets like cryptocurrencies that had benefited from the prospect of easier monetary policy. Following last week’s Fed meeting, markets are now pricing in a pause on further rate cuts until at least June, according to analysis cited in the report.

The reaction was severe and immediate. More than $250 billion exited the spot crypto markets, dragging total market capitalization down to $2.67 trillion—its lowest level since April 2025. This decline has effectively wiped out all gains made over the preceding nine months, pushing the market firmly into bear territory. The selloff reinforces observations from commentators like The Kobeissi Letter, which noted that “macroeconomic uncertainty is elevated.” The rapid retreat suggests investors are hastily repricing assets in the face of a potentially less accommodative Federal Reserve under Kevin Warsh.

The downturn has been brutal across the crypto board. Bitcoin, the market bellwether, tanked to a nine-month low, briefly dipping below $76,000 during Monday morning trading in Asia. This represents a staggering 40% decline from its all-time high. Ethereum fared no better, collapsing 14% over the weekend to reach $2,250, its lowest price point since May 2025. The broader altcoin market has been “obliterated,” with most tokens now down 70% to 80% from their cyclical peaks as panic selling extends into a new week.

This steep decline has reignited discussions about the infamous four-year crypto cycle pattern, which appears to remain intact. The scale of the losses indicates a market that had become overextended and was highly sensitive to shifts in macroeconomic policy expectations. The simultaneous pressure on both major assets like BTC and ETH and smaller altcoins underscores a broad-based flight from crypto risk, moving beyond mere sector rotation into a full-scale capital exodus.

Attention now turns to a critical week of economic releases that could either exacerbate or alleviate the market’s fears. As Michael Reynolds, vice president of investment strategy at Glenmede, told Reuters, “We haven’t really gotten a lot of clean looks at the state of the labor market and inflation because of that government shutdown last year, so we think those are going to probably be more important than usual.” The week’s data docket is packed: Monday’s ISM Manufacturing PMI, Tuesday’s JOLTS Job Openings for December, Thursday’s Initial Jobless Claims, and the pivotal January Jobs Report on Friday.

These labor market indicators will be scrutinized for any sign of weakness that could prompt the Kevin Warsh-led Fed to reconsider its apparent hawkish stance. As noted in the analysis, any surprise softening in employment data could sway market expectations away from the current forecast of a rate-cut pause until June. Concurrently, the corporate earnings season enters a crucial phase. Tech giants Alphabet (GOOGL) and Amazon (AMZN)—both members of the so-called ‘Magnificent 7’—are set to report, testing stock market resilience following a disappointing report from Microsoft. Their performance will be a key barometer for whether the selloff remains confined to crypto or begins to infect traditional equity markets.

In essence, financial markets are at a crossroads. The crypto selloff, triggered by Federal Reserve policy fears, has set a negative tone. The coming days will determine whether this is an isolated correction or the start of a broader downturn, with labor data guiding interest rate expectations and mega-cap earnings defending stock market stability. The interplay between these forces will define the market narrative for weeks to come.