Early Wednesday morning, Bitcoin dropped to as low as $66,804. Ethereum fell below $2,000, while XRP and BNB recorded losses exceeding 4%. Markets have entered a more cautious pricing regime in recent days.

Three main reasons behind Bitcoin’s decline:

• Hawkish signals from the Federal Reserve
• Liquidation of leveraged positions
• Weak institutional capital inflows

Kevin Warsh “Shock” and Liquidity Concerns

BTC declined 3.1% over the past 24 hours, while Ethereum slid 4.1% to $1,965. XRP lost 4.3% and BNB dropped 4.5%. This move isn’t purely technical — it reflects a clear macro reassessment.

According to Bitrue Research Lead Andri Fauzan Adziima, the primary driver of the sell-off is a hawkish shift in Fed expectations following Kevin Warsh’s emergence. This implies tighter liquidity conditions and fewer rate cuts ahead.

Adziima noted that investors are currently watching the $60,000–$65,000 range as a critical support zone. If this area holds, prices could stabilize sideways. Otherwise, any recovery may require renewed macroeconomic easing.

Major Cleanup in Leveraged Trades

Kronos Research CIO Vincent Liu said derivatives data indicates a significant leverage flush. Deep position closures were observed across exchanges, while funding rates suggest most overleveraged trades have been wiped out.

Liu added that institutional capital remains on the sidelines. Large players are reluctant to re-enter aggressively until they see sustained ETF momentum or fresh macro catalysts.

While inflows into exchange-traded funds (ETFs) continue, they have yet to offset price pressure. SoSoValue data reflects this cautious backdrop. On Tuesday, spot Bitcoin ETFs recorded net inflows of $166.56 million, up from $145 million the previous day. Spot Ethereum ETFs saw more modest inflows of $13.82 million.

As risk appetite weakens, investors have shifted into a more defensive short-term stance.

Data Calendar Will Be Decisive

Despite crypto weakness, Asian markets opened higher. South Korea’s Kospi rose 1.24% by midday, while Hong Kong’s Hang Seng gained 0.42%. Japanese markets were closed for a public holiday.

In the U.S., performance was mixed. The S&P 500 declined 0.33%, Nasdaq Composite fell 0.59%, while the Dow Jones posted a modest 0.1% gain. This divergence followed weaker-than-expected retail sales data, showing consumer spending remained flat in December.

Market participants are now focused on U.S. labor market data due Thursday. These figures could reshape expectations around the future rate path and significantly influence overall risk sentiment.

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