Bitcoin (BTC) collapsed through critical support at $78,000 on Tuesday, bottoming out near $74,500, a price level unseen since President Trump’s 2024 election victory. The sharp reversal has effectively erased the entire post-election rally, driven by a sudden repricing of U.S. monetary policy following the nomination of Kevin Warsh as the next Federal Reserve Chair.
The Warsh Pivot
Markets hate uncertainty, but they hate a hawk in dove’s clothing even more. While the White House has pushed for rate cuts, the nomination of former Fed Governor Kevin Warsh has forced a violent recalibration of risk. Traders perceive Warsh not as the liquidity-pumping ally they hoped for, but as a discipline-focused hawk likely to prioritize real rates over asset price inflation.
The reaction was immediate and brutal. As news of the nomination solidified over the weekend, liquidity vanished. Bitcoin shed approximately 15% from its consolidation range, dragging the broader crypto market down with it. Ethereum (ETH), Solana (SOL), and BNB all posted double-digit losses, signaling a comprehensive risk-off flush.
$7 Billion Washed Out
The leverage wipeout was historic. Data from Kaiko indicates that the cascading sell-off triggered approximately $7 billion in liquidations across digital asset markets. Long positions, leveraged on the assumption of a perpetual "Trump Put," were decimated as stop-losses triggered in a domino effect below $78,000.
The nomination's emphasis on monetary discipline, higher real rates, and reduced liquidity frames crypto not as a hedge against debasement but as a speculative excess that fades when liquidity tightens. Markus Thielen, Founder of 10x Research
Institutional Context: The Liquidity Drain
This isn't isolated to crypto. Gold, often correlated with Bitcoin as a debasement hedge, plummeted from a record $5,500 to trade near $4,700. The synchronized sell-off suggests a macro-level liquidity drain rather than a sector-specific panic. Institutional desks are de-risking aggressively, uncertain if Warsh will defend the Fed’s independence or bend to political pressure, a "hybrid" stance that offers no safe harbor for speculative capital.
With the $75,000 psychological floor shattered, technical analysts are now eyeing the $70,000 region as the next line of defense. Volume remains thin, and buy-side depth on major exchanges has yet to recover.
