Bitcoin tumbled to its lowest level in two months on Friday, extending a bruising sell-off that has seen the world’s largest cryptocurrency lose a third of its value since peaking in October, as traders braced for potential changes at the helm of the U.S. Federal Reserve that could tighten liquidity conditions across financial markets.
The digital asset fell 2.5% to $82,300 in Friday trading, marking its fourth straight month of losses—the longest losing streak since 2017. The decline came as mounting speculation centered on Kevin Warsh, a former Federal Reserve governor, as President Donald Trump’s likely nominee to succeed current Fed Chair Jerome Powell.
The prospect of Warsh’s appointment has sent shockwaves through cryptocurrency markets, which have historically benefited from the Fed’s expansive monetary policies. Warsh, known for his hawkish stance on monetary policy, has advocated for what he terms “regime change” at the central bank, including a significant reduction in the Fed’s balance sheet—currently bloated from years of quantitative easing.
“As you start to talk about pulling the rug out from underneath that … all the hedges against balance sheet expansion that people have been going for—gold, crypto, obviously bonds—start to sell a little bit,” explained Damien Boey, portfolio strategist at Wilson Asset Management in Sydney.
Cryptocurrencies have long been viewed as beneficiaries of loose monetary policy, rallying during periods when the Fed injected liquidity into money markets. A smaller Fed balance sheet would represent a fundamental shift away from the accommodative conditions that have supported speculative assets, including digital currencies.
The selloff marks a dramatic reversal of fortune for crypto enthusiasts who had anticipated a “golden era” under the Trump administration. Campaign promises of crypto-friendly regulation and robust capital flows have failed to materialize into sustained price gains, with Bitcoin now trading well below its October record highs.
Ether, the second-largest cryptocurrency, fared no better, sliding 2.9% to $2,735.48 and also hitting a two-month low. The broader digital asset market has struggled to find direction since last year’s downturn, notably underperforming both gold and equity markets that have posted significant gains.
Friday’s cryptocurrency rout didn’t occur in isolation. Sean Dawson, head of research at crypto options platform Derive.xyz, pointed to contagion effects from traditional markets, noting that “fears around AI exuberance” were also a “big contributor” to the selloff.
A 10% plunge in Microsoft shares overnight—following the tech giant’s report of massive AI infrastructure spending that yielded only modest revenue growth—sent tremors through global markets. While cryptocurrencies have become less correlated with traditional risk assets over time, Dawson noted that “some correlation remains,” particularly during periods of heightened market stress.
The dollar strengthened amid the crypto weakness, as investors rotated toward traditional safe-haven assets. The currency’s rise reflects growing expectations that the Fed’s next leader could pursue a more restrictive monetary policy stance, potentially lifting interest rates and draining liquidity from the financial system.
For cryptocurrency investors who have weathered previous boom-and-bust cycles, the current downturn presents a test of conviction. With technical indicators pointing to continued weakness and macroeconomic headwinds mounting, market participants will be closely watching for any concrete announcements regarding Fed leadership—a decision that could determine whether Bitcoin’s losing streak extends into the spring or if the battered digital asset can find a floor.
As trading concluded Friday, one thing remained clear: the dream of a Trump-era crypto renaissance has, at least for now, collided with the harsh realities of monetary policy and market dynamics.
WHAT YOU SHOULD KNOW
Bitcoin has plunged to a two-month low, losing a third of its value since October, primarily due to speculation that Trump’s likely Fed chair pick, Kevin Warsh, will shrink the Fed’s balance sheet.
This matters because cryptocurrencies have historically thrived on loose monetary policy and abundant liquidity—conditions that would reverse under Warsh’s leadership. The four-month losing streak marks crypto’s longest slide in eight years, dashing hopes that the Trump administration would usher in a golden era for digital assets.
