Fed Prudence and Political Dynamics Challenge the Crypto Market's Stability

Crypto Traders Worry as Market Fatigue Sets In

Shifts in U.S. monetary policy and heightened political discourse have fueled unease among crypto investors, who are now watching the Federal Reserve’s actions and political influences with increased scrutiny. The Fed’s move to lower interest rates by 25 basis points in December 2024, along with hints of a more restrained approach to further cuts in 2025, has injected uncertainty into the digital asset space. The central bank pointed to ongoing inflation and a robust economy as reasons for its caution, but the slower pace of rate reductions—now expected to be two instead of four—has led to concerns about liquidity, a vital component for cryptocurrencies. Experts warn that a tighter monetary stance, including ongoing quantitative tightening (QT), may dampen short-term crypto performance, as these assets typically benefit from plentiful liquidity Here's How the Latest Fed Decision Could Affect … [ 4 ].

Political statements have added to the market’s nervousness. Donald Trump’s comments about Fed Chair Jerome Powell in June 2025, though not fully released, caused immediate swings in

and . In just a few hours, Bitcoin slipped 1.2% to $67,700, while Ethereum dropped 1.5% to $3,450. The remarks, seen as criticism of Powell’s monetary direction, increased doubts about possible policy changes and the Fed’s independence. Major investors, such as Grayscale’s Bitcoin Trust (GBTC), experienced $50 million in withdrawals by late afternoon, a sign that institutions were hedging against policy-driven volatility Trump Comments on Fed Chair Powell: Market Reaction and Crypto Price Impact (BTC, ETH) – June 2025 Update [ 3 ].

Despite these challenges, some Wall Street analysts, including Tom Lee of BitMine, see cryptocurrencies as prime beneficiaries of Fed rate cuts. Lee’s research, referencing trends from 1998 and 2024, forecasts a significant surge in Bitcoin and Ethereum within three months if the Fed follows through with its planned 25 basis-point cut on September 17, 2025. He believes that digital assets, along with technology shares and small-cap stocks, are poised to lead a risk-on rally due to their sensitivity to liquidity shifts. Institutional moves back this up: BitMine Immersion Technologies, which holds 1.72 million ETH (worth $7.65 billion), recently bought $21.28 million in ETH, signaling optimism for a near-term rebound The Crypto Market In 2025: Are Crypto Demand … [ 9 ].

Still, signs of exhaustion are clear, with open interest dropping and liquidations rising. Bitcoin’s open interest (OI) has declined to $100 billion from a late-May peak of $120 billion, while Ethereum saw $35.63 million in liquidations over 24 hours, pointing to scattered market positions. Alongside a 10% increase in Bitcoin inflows to exchanges, these trends suggest traders are preparing for turbulence as key macro events—like U.S. inflation reports—approach. The relationship between Fed policy and crypto is further complicated by geopolitical issues, including tariffs and new regulations from the Trump administration. The recently established “Crypto Task Force” aims to improve oversight, but the mix of strict fiscal measures and crypto-friendly policies sends mixed signals to the market.

Nonetheless, the sector’s long-term outlook remains positive. Bitcoin continues to command 60% of the total crypto market capitalization, and institutional use of stablecoins—especially in Asia—demonstrates ongoing strength. Even with short-term challenges, analysts highlight that Bitcoin’s scarcity and Ethereum’s expanding roles in DeFi and tokenization could fuel continued growth. As the Fed balances its policy objectives, the coming period will reveal whether crypto traders can endure the volatility or if persistent fatigue will prompt a shift in risk-taking behavior.