Bitcoin Price Correction Widens as Federal Reserve Tempers Rate Cut Expectations; Altcoins Suffer Double-Digit Losses

Bitcoin price retreated significantly during recent market volatility, with the cryptocurrency sliding into mid-$96K territory amid a broader crypto market selloff. The CoinDesk 20 Index, which tracks the top digital assets, suffered losses exceeding 10% during the same period. The Federal Reserve’s latest communications regarding interest rate projections for 2025 caught market participants off-guard, triggering substantial liquidations across leveraged positions and forcing a broad reassessment of valuations across the crypto ecosystem.

Federal Reserve’s Hawkish Stance Triggers Market-Wide Decline

The Federal Reserve’s projection of a more conservative rate-cut schedule for 2025 reshaped market sentiment dramatically. Fed Chair Jerome Powell’s comments on inflation expectations, which leaned toward a more restrictive policy stance, unraveled the bullish momentum that had carried Bitcoin price and broader crypto markets higher through late 2024. The combination of slower anticipated rate cuts and inflation concerns caused significant repricing across risk assets.

The U.S. dollar index surged above 108—its strongest level since November 2022—while 10-year Treasury yields climbed sharply above 4.6%, marking the highest level since May. These broader macroeconomic signals reinforced weakness in cryptocurrency valuations, which are particularly sensitive to interest rate and currency dynamics.

Market strategists noted that the crypto market had grown increasingly vulnerable following the steep ascent of Bitcoin price toward and through six-figure territory. “The crypto market has already been on pins and needles around the possibility for a correction,” observed analysts tracking the asset class. The Fed’s decision provided the catalyst that markets had anticipated might arrive.

Altcoin Rout: Ethereum, Solana, and Others Face Sharper Declines

While Bitcoin price posted notable losses, altcoins experienced significantly worse outcomes. Ethereum fell to below $3,500 with a 10.8% 24-hour decline, while alternative layer-1 blockchains and utility tokens suffered even steeper withdrawals. Cardano’s ADA, Chainlink’s LINK, Aptos’ APT, Avalanche’s AVAX, and Dogecoin’s DOGE all posted 15%-20% losses during the acute selling phase.

Solana presents a particularly striking case study: SOL declined to its lowest price point since early November, essentially erasing an impressive post-election rally that had followed the 2024 presidential election. The reversal was particularly dramatic given SOL’s approximately 26% plunge from its recent record high, demonstrating how quickly momentum in cryptocurrencies can reverse.

The broader pattern reflects a classic risk-off environment where investors abandon speculative positions and rotate capital toward perceived safety. Altcoins, which carry higher volatility profiles and carry greater dependency on sentiment-driven trading, bear the brunt of such reversals.

Liquidation Cascade: On-Chain Data Shows Leverage Unwinding

The market mechanics underlying the decline became visible through liquidation data: approximately $1.2 billion in leveraged derivative positions were closed across all cryptocurrency assets within the 24-hour window following the Fed announcement. Of this total, over $1 billion represented long positions—trades predicated on price appreciation.

These forced liquidations created a self-reinforcing downward spiral. As leveraged longs were automatically closed due to margin requirements, the additional selling pressure accelerated price declines, triggering further liquidations at lower price levels. This dynamic explains the disproportionate severity of altcoin declines relative to broader financial markets, where similar day trading mechanics do not operate at equivalent scales.

Technical Breakdown and Market Perspective

Industry analysts offered measured perspectives on the correction’s significance. One assessment suggests that for crypto markets, “a pullback like this feels healthy” when examined through a year-over-year growth lens. Beyond pure technical factors, year-end dynamics in traditional markets—where investors harvest tax losses to offset capital gains—may contribute partial explanation for broader selling pressures in risk assets.

Bitcoin price recovery prospects depend on establishing new technical support levels. Specifically, sustained breaks above $72,000 and $78,000 resistance zones would signal renewed structural strength. Until such levels hold on a consistent basis, the intermediate trend remains challenged.

Market Recovery Bounce: Short-Covering Rally Pushes Bitcoin Higher

In a notable development following the initial flush lower, Bitcoin price rebounded sharply to approach $69,000 as technical traders covering short positions and thin liquidity conditions amplified the upside move. The reversal jolted altcoins including Ethereum, Solana, Dogecoin, and Cardano higher, while crypto-linked equities including major platforms and mining firms participated in the relief rally.

Market participants described the bounce as a technical correction driven principally by short-covering dynamics rather than fundamental catalysts. The rebound’s durability remains uncertain until Bitcoin price establishes higher lows and reaches confirmed resistance zones. Fund managers were observed rotating into volatile altcoins and options strategies to capture the heightened price swings accompanying the recovery phase.