Crypto Market Drops As Trump Changes Fed Pick, AI Bubble Concerns Rise
The cryptocurrency market experienced a correction as Bitcoin pulled back to $85,000 and Ether to $2,900, driven by increased risk aversion from traders amid negative US economic sentiment and uncertainty over the next Federal Reserve Chair. The US Treasury’s resilience, extended tax credits, and increased debt ceiling signal inflation concerns alongside the Fed expanding its balance sheet. Consumer spending is weakening, with more Americans planning to cut holiday expenditures and citing affordability issues. Excessive leverage persists in crypto markets, leading to large liquidations and heightened downside risk. Investors are also shifting out of risk assets like cryptocurrencies due to weak performance in the artificial intelligence sector and tightening market liquidity. Bridgewater Associates warned of a potential tech bubble fueled by debt. The US Dollar Index stabilized, indicating regained investor confidence in the US economy, which diminishes the appeal of Bitcoin and Ether as alternative hedges. Overall, leverage and macroeconomic uncertainty continue to pressure crypto prices.
