- Bitcoin briefly hit $74.5K after Warsh’s Fed confirmation, with Ethereum also slipping below $2,170.
- Over $2.5B in leveraged crypto longs were liquidated, boosting short-term market volatility.
- BTC support at $74K and resistance at $80K are crucial as investors watch institutional flows and Fed signals.
Bitcoin plunged below $80,000 on Saturday after Kevin Warsh was confirmed as the next Federal Reserve Chair, triggering widespread deleveraging across crypto markets. BTC briefly dropped to $74,500, while Ethereum fell below $2,170.
As per the QCP report, the downward pressures have also been exacerbated by the liquidation of almost $2.5 billion in levered long holdings. Furthermore, persistent ETF outflows have put to further pressures on the market, making this the fourth straight month of falls for Bitcoin. Due to technical levels, markets are currently closely monitoring prices between $74,000 and $80,000, as well as institutional and Fed-related pressures.
Financial markets have rapidly responded to the confirmation of Warsh’s appointment, indicating increased risk aversion in equities and safe-haven assets. For example, gold and silver have retreated from their overbought status due to investors reassessing Fed policy under Warsh’s leadership.
For this reason, crypto markets have experienced increased pressures on investors in the short term due to increased volatility. Furthermore, options markets have also indicated increased risk aversion due to a tilt in the skewness of Puts.
BTC Stabilization and Technical Outlook
Bitcoin has stabilized above $74,500, a level consistent with 2025 cycle lows. Although downside hedging is less aggressive compared to previous periods of stress, the momentum remains on the downside. In fact, in November, Bitcoin went from $107,000 to $80,500, leading to extreme demand for downside protection.
However, the current move may be interpreted as a potential base for the market, at least in the short term, for some investors. From a structural perspective, investors can look at strategies such as short seagulls, which involve using a put spread financed through the sale of out-of-the-money calls.
The market is susceptible to additional liquidation-driven actions since the upside is still limited by resistance from earlier levels. Further declines could result after a close below $74,000, possibly returning the cryptocurrency market to trading ranges from 2024.
Conversely, a breakout over $80,000 might stabilize the market and reverse the skew in the options market. De-escalation of geopolitical tensions and institutional buying, especially around the average cost basis of $76,000, may provide additional boosts. Influencing market mood will continue to depend heavily on Fed communication, especially under Warsh.