Crypto Prices Navigate Fed-Driven Market Turbulence: From Selloff to Recovery

Crypto prices have experienced significant volatility in response to macroeconomic shifts and policy decisions emanating from traditional financial markets. The digital asset ecosystem demonstrated its interconnection with conventional markets as broader market forces reshaped investment sentiment and trading dynamics across multiple asset classes.

The Fed’s Rate Cut Projection Sends Shockwaves

The catalyst for recent market turbulence originated from the Federal Reserve’s policy guidance announced in mid-December 2024. Federal Reserve Chair Jerome Powell’s remarks regarding the pace of future rate cuts disappointed market participants who had anticipated more aggressive monetary easing. The Fed’s projection of only two rate cuts for 2025—a notably more hawkish stance than market consensus—triggered an immediate reassessment of crypto valuations and risk appetite across the board.

Powell’s comments on persistent inflation expectations compounded investor concerns, establishing a framework for broader selloff pressure. The U.S. dollar index (DXY) subsequently surged above 108, reaching levels unseen since November 2022, while 10-year Treasury yields climbed sharply above 4.6%—the highest levels since May that year. These shifts in traditional markets reverberated through crypto prices as investors repositioned portfolios in response to changing rate expectations.

Major Altcoins Face Largest Losses Amid Market Rout

The immediate aftermath of the Fed announcement revealed sharp disparities in how crypto prices across the portfolio responded to the shock. Bitcoin, which had approached the symbolic $100,000 milestone during the rally following the November election, retreated to the mid-$96,000 range before sliding further. The broader CoinDesk 20 Index, a composite measure of major cryptocurrencies, declined more than 10% during the acute selloff phase.

Altcoins bore the brunt of liquidation pressure. Ethereum’s ether (ETH) experienced double-digit losses exceeding 10%, sliding below the $3,500 level that day. Other major altcoins including Cardano’s ADA, Chainlink’s LINK, Aptos’ APT, Avalanche’s AVAX, and Dogecoin’s DOGE all suffered significant declines in the 15%-20% range. Most notably, Solana’s SOL collapsed to its weakest price point since early November, effectively erasing the substantial post-election rally that had pushed the asset toward record highs just weeks earlier—a staggering 26% decline from its peak.

Liquidations Surge as Leveraged Positions Unwind

The market structure underlying this selling pressure revealed elevated risk exposure across the derivative markets. Within the 24-hour window following the Fed announcement, approximately $1.2 billion in leveraged cryptocurrency derivatives positions were forcibly liquidated across all assets, according to CoinGlass data. Over $1 billion of these liquidations represented long positions—bets that prices would continue ascending—indicating that the sharp reversal caught momentum traders significantly offside.

This cascade of liquidations created a feedback loop amplifying downside pressure. As leveraged long positions were closed at stop-loss levels, selling accelerated, which triggered additional automated liquidations at lower prices. The interconnection between spot prices and derivative markets meant that this technical unwind influenced crypto prices far more severely than fundamental analysis might have suggested.

Context: The Post-Election Rally and Its Unraveling

To appreciate the magnitude of the correction, context proves essential. Crypto prices had surged almost vertically in the weeks following Donald Trump’s presidential election victory in early November 2024. Market participants attributed this rally to expectations of pro-cryptocurrency policies from the incoming administration and a general risk-on sentiment shift. The momentum was nearly uninterrupted, with Bitcoin approaching and briefly trading near $100,000—a level that had previously seemed aspirational.

However, this sustained rally created technical and psychological fragility. As market strategist Joel Kruger from LMAX Group noted, “The crypto market had been on pins and needles around the possibility for a correction following the record run through $100,000. We got that catalyst from the world of traditional markets. The fallout from the Fed decision was simply too much to ignore.”

Market Recovery and Current State of Crypto Prices

The situation has since evolved considerably. As of late February 2026, crypto prices display markedly different characteristics than during that acute December selloff. Bitcoin has recovered substantially to approximately $68,180 per coin, exhibiting a 24-hour gain of 5.03%. This represents a stabilization phase following the intermediate lows.

The broader altcoin market has demonstrated particular strength in the recovery phase. Ethereum has advanced to approximately $2,060, posting a 24-hour increase of 9.38%. Supporting coins have also recovered meaningfully: ADA shows a 24-hour gain of 11.30%, Chainlink’s LINK gained 10.41%, Aptos’ APT advanced 14.09%, Avalanche’s AVAX rose 10.10%, Dogecoin’s DOGE increased 8.39%, and Solana’s SOL recovered with a 7.54% 24-hour gain. This rotation into higher-beta assets suggests a normalization of risk appetite and renewed confidence in altcoin valuations.

Lessons from Market Cycles and Structural Observations

Market participants have drawn several insights from this episode of crypto prices volatility. Azeem Khan, co-founder and COO of Morph, a layer-2 network, offered perspective on the healthy nature of such corrections: “When you zoom out and consider the year-over-year growth, a pullback like this feels healthy. It’s also worth noting that historically, year-end selloffs in securities can occur as investors offset losses against gains to lower their tax liabilities. While it’s hard to say how much of this is driving the current trend, it could be a contributing factor.”

This commentary highlights two crucial dynamics: first, that the correction, while painful in the short term, represents a proportional pullback from an exceptional rally; second, that traditional market dynamics—such as tax-loss harvesting—increasingly influence crypto prices as digital assets integrate further into mainstream portfolios.

The volatility also underscores the structural fragility that can persist beneath strong nominal price advances. Going forward, analysts caution that macro conditions remain fluid, stablecoin supply dynamics warrant monitoring, and cascading liquidation risks below certain technical levels could reignite volatility in crypto prices. Nevertheless, the current recovery trajectory suggests market participants are absorbing the Fed decision and establishing a new equilibrium reflecting higher interest rate expectations.