Jerome Powell's Policy Shift Triggers Wave of Market Realignment Across Crypto Assets

The cryptocurrency market faces mounting pressure following a significant shift in monetary policy rhetoric from Federal Reserve Chair Jerome Powell and the central bank’s latest decisions. The market dynamics have fundamentally changed since the Fed’s late-2024 policy announcement, as restrictive signals continue to reshape investor sentiment across digital assets.

Fed’s Hawkish Pivot: What the December Decisions Signaled

The Federal Reserve reduced its benchmark interest rate by 25 basis points during its December meeting, bringing the fed funds rate to the 4.25%-4.50% range. This marked the third consecutive easing action of that year, totaling 100 basis points in cuts since September. However, the forward guidance proved more restrictive than market participants had anticipated.

The Fed’s quarterly economic projections, highlighted by the “dot plot” showing expected rate trajectories, revealed policymakers expect the fed funds rate to decline to just 3.9% by the end of 2025—only 50 basis points lower than current levels. This compared unfavorably to September’s projection of 3.4%, signaling a decidedly less dovish approach for the year ahead. Fed Chair Jerome Powell emphasized during his press conference that the projected slower pace of further cuts reflects elevated inflation readings from recent months and higher inflation expectations. The Personal Consumption Expenditures (PCE) inflation forecast for next year rose to 2.5%, up from September’s 2.1% estimate.

Market Turbulence: The Immediate and Ongoing Impact

The policy announcement triggered immediate volatility across cryptocurrency markets. Bitcoin faced significant pressure, with the asset experiencing substantial losses following Jerome Powell’s remarks to the press. Major altcoins suffered proportionally larger declines, with assets like Cardano’s ADA, XRP, and Litecoin’s LTC all experiencing double-digit percentage drops in the days following the announcement.

The broader market reaction reflected growing concerns about tightening financial conditions despite the Fed’s rate-cutting actions. Long-bond yields and mortgage rates had increased since September, while the U.S. dollar had appreciated—both factors typically associated with weaker cryptocurrency performance. Andre Dragosch, European Head of Research at Bitwise, noted that dollar appreciation carries particular significance for digital assets, as it tends to correlate with global money supply contraction.

Macroeconomic Headwinds: Liquidity and Currency Dynamics

Beyond immediate price action, deeper macroeconomic forces continue to weigh on the cryptocurrency complex. Federal Reserve net liquidity has continued to decrease, creating challenging conditions for risk assets. The combination of tightening liquidity and dollar strength presents ongoing headwinds for Bitcoin and related cryptocurrencies.

However, some supportive factors persist from an on-chain perspective. Data shows declining exchange balances for Bitcoin, a pattern that supports the hypothesis of intensifying supply scarcity. This technical strength stands in contrast to the macro-driven selling pressure, creating a mixed fundamental picture.

Current Market Positioning: February 2026 Update

As markets have evolved since those December policy decisions, cryptocurrency valuations have adjusted to reflect the new monetary policy environment. Bitcoin currently trades around $68,230, while major altcoins have stabilized with modest gains over recent trading sessions. Cardano (ADA) has appreciated 10.10%, Litecoin (LTC) has gained 7.10%, Ethereum (ETH) is up 6.59%, and Solana (SOL) has increased 7.04%. Even Dogecoin (DOGE) shows positive momentum at 7.75% gains, while XRP records a 3.75% increase.

These recent gains represent a technical correction after weeks of sustained pressure, though analysts caution that such rebounds often reflect short-covering and thin liquidity conditions rather than fundamental catalysts. Joel Kruger from LMAX Group emphasized the importance of distinguishing between technical bounces driven by bearish positioning and genuine shifts in market structure. Breaking through sustained resistance around $72,000 and $78,000 would be required to signal a more durable uptrend.

The Jerome Powell Effect: Navigating Forward

The cryptocurrency market’s experience since Jerome Powell’s December policy statements underscores how deeply traditional monetary policy continues to shape digital asset performance. While on-chain metrics suggest long-term structural strength through supply dynamics, the macroeconomic environment—dominated by stronger U.S. dollar positioning and diminished Fed liquidity—remains a powerful near-term constraint. Investors continue to monitor Fed communication closely, recognizing that Jerome Powell’s policy guidance remains a critical driver of market sentiment across the cryptocurrency complex.