Market analysts are pointing directly to the nomination of Kevin Warsh as the next Federal Reserve Chair as the primary catalyst for the decline. According to Andri Fauzan Adziima, research lead at Bitrue, the move lower follows a hawkish shift in Fed expectations, which signals tighter liquidity and fewer rate cuts ahead. Traders are now closely watching for price stabilization around the $60,000 to $65,000 support levels, noting that a renewed spark in macro easing would likely be required to trigger a meaningful rebound, The Block reported.
Despite the sharp price drop, some experts believe the correction has served to stabilize market mechanics. Vincent Liu, CIO of Kronos Research, observed that derivatives data suggests much of the excess leverage has been flushed out of the system. He noted that Bitcoin and Ethereum dipped as exchanges underwent deep deleveraging, with funding rates now signaling that most over-leveraged positions have been cleared. However, Liu added that institutional capital appears to be holding back, waiting for sustained ETF momentum or fresh macro signals before re-entering the market in size.
Investment activity through exchange-traded funds remained positive despite the volatility. On Tuesday, spot Bitcoin ETFs recorded $166.56 million in net inflows, an increase from the $145 million seen the previous day. Spot Ethereum ETFs saw more modest participation, bringing in $13.82 million compared to Monday’s $57 million. This continued inflow suggests that while the spot price is struggling, there is still underlying demand from fund investors.
In traditional markets, the backdrop was mixed as Asian equities moved higher on Wednesday morning. South Korea’s Kospi rose 1.24% by midday and Hong Kong’s Hang Seng index edged up 0.42%, while Japanese markets remained closed for a public holiday. This contrasted with the U.S. markets on Tuesday, where the S&P 500 and Nasdaq Composite declined following weaker-than-expected retail sales data for December. Analysts believe the next major indicator for risk appetite will be Thursday’s U.S. labor market report, which will offer clearer signs on the future path of interest rates.
