Cryptocurrency Market Frozen by Fed's 'Hawkish Freeze', Is This the Start of a Prolonged Bear Market?

▲ Jerome Powell, Bitcoin (BTC)/ChatGPT generated image ©

The virtual asset market, having encountered the colossal reef of the US Federal Reserve's hawkish benchmark interest rate freeze, is sinking into the quagmire of a deep bear market, pushing investor fear to its extreme.

As of 6:20 AM on April 30th, according to CoinMarketCap, a cryptocurrency market data aggregation site, the global virtual asset market capitalization recorded $2.53 trillion, a 1.19% decrease compared to the previous day. The Fear & Greed Index, which indicates investment sentiment, dropped to 39, reflecting the widespread fear in the market. Bitcoin (BTC), the leading cryptocurrency, traded at $75,848.19, down 0.66% from 24 hours ago, precariously holding the $75,000 mark. Leading altcoin Ethereum (ETH) recorded $2,247.23, down 1.90%, while XRP (Ripple) fell to $1.36, Solana (SOL) to $82.83, and Dogecoin (DOGE) to $0.1023, all declining simultaneously, with a strong bearish sentiment pervading the entire market.

The biggest negative factor weighing on the market is undoubtedly the monetary policy uncertainty of the US Federal Reserve. On the 29th (local time), the Federal Open Market Committee (FOMC) froze the benchmark interest rate at 3.50-3.75% as expected by the market. However, internally, three committee members, Beth Hammack, Neel Kashkari, and Lorie Logan, strongly opposed the inclusion of dovish language in the statement, which implies monetary easing. The market interpreted this as a de facto hawkish freeze and is rapidly withdrawing from risk assets like virtual assets.

In addition, the surge in international oil prices due to the prolonged war between the US and Iran is reigniting inflation fears and choking the market. As it becomes difficult to gauge when oil production will normalize after the war, predicting the future path of prices has become virtually impossible. Indeed, major bank JPMorgan Chase released a shocking report suggesting that not only will the Fed freeze interest rates for the remainder of this year, but it could even raise interest rates by 0.25 percentage points in the third quarter of next year, pouring cold water on market expectations for rate cuts.

The transitional period of Fed leadership change is also a key factor exacerbating market confusion. Current Chair Jerome Powell's term ends on the 15th of next month, and Kevin Warsh, the nominee for the next chair awaiting Senate confirmation, is expected to take the helm. However, with Chair Powell deciding to remain on the board until January 2028, concerns about internal power struggles are rising. President Donald Trump, who is pressuring for interest rate cuts, the new chair emphasizing the Fed's independence, and hawkish committee members insisting on price stability — the diverging views among them are raising fatal doubts about policy consistency.

Market experts diagnose that the virtual asset market will find it difficult to find clear momentum for a rebound until geopolitical crises are resolved and clear signals of interest rate cuts emerge. As long as sticky inflation concerns and the internal discord within the Fed are not resolved, major virtual assets, including Bitcoin, are expected to find it difficult to avoid a grueling sideways-to-downward market that heavily sways with every single macroeconomic indicator for the time being.

*Disclaimer: This article is for investment reference only, and we are not responsible for any investment losses based on it. The content should be interpreted for informational purposes only.*