Crypto Drops as Markets Turn Defensive Ahead of Key Fed Signals
Cryptocurrencies and digital asset-linked stocks came under renewed pressure Tuesday as investors turned risk-averse ahead of a pivotal week for U.S. monetary policy. With the Federal Reserve’s July FOMC meeting minutes due Wednesday and Chair Jerome Powell’s Jackson Hole speech on Friday, traders are bracing for signs the Fed may hold rates higher for longer.
Bitcoin slid 3.2% over the past 24 hours, dipping below $114,000. Ether fell 5.3% to under $4,200, while XRP and Cardano’s ADA dropped 6.2% and 8%, respectively. The overall crypto market declined 3.2% on the day.
Losses were sharper across crypto-exposed equities. Marathon Digital (MARA), Coinbase (COIN), and MicroStrategy (MSTR) closed down 5.7%, 5.8%, and 7.4%, respectively, as digital asset valuations faltered.
In contrast, broader U.S. stock indices were more stable. The Dow Jones closed flat, while the S&P 500 and Nasdaq lost 0.59% and 1.5%. The relative underperformance of crypto underscores its sensitivity to interest rate expectations and its reliance on market liquidity.
All Eyes on the Fed
The Federal Reserve will publish the minutes of its July 29–30 meeting on August 20 at 2 p.m. ET, offering insights into internal policy discussions on inflation and tariffs. Just two days later, Powell will deliver a keynote at the Jackson Hole Economic Symposium — a speech that could shape expectations for the September FOMC decision.
8 Reasons the Fed May Choose to Hold Rates Steady
- Tariffs’ Lagged Effects
Businesses have so far absorbed higher import costs, but once passed to consumers, those costs could push inflation back up — giving the Fed reason to wait before easing. - Elevated Wholesale Prices
The Producer Price Index remains hotter than forecast, indicating underlying inflationary pressures that complicate arguments for a September cut. - Corporate Profit Pressure
Executives have warned that cost absorption isn’t sustainable. Once price hikes reach consumers, the inflation outlook could worsen. - Conflicting Economic Data
Slowing job gains but persistent consumer spending present an uneven picture — one that could encourage the Fed to stay cautious. - Policy Complexity
The intersection of tariffs, fiscal shifts, and trade tensions creates uncertainty that may lead Powell to favor a conservative stance. - Historical Caution
Past tariff rounds triggered delayed inflation spikes. The Fed may look to that precedent as justification for maintaining rates. - New Data Incoming
Preliminary August PMIs due Thursday may reveal growing input costs — a development Powell could cite as a reason to hold off. - Divided Fed Views
The FOMC minutes may expose disagreements among policymakers. A call for consensus could tilt policy toward a pause.
Crypto’s Sensitivity to Rates
Higher interest rates reduce access to capital, making mining more expensive and speculative investment less attractive. Crypto exchanges also see lower activity when liquidity is tight. A hawkish tone from Powell could deepen the market slump, while any dovish surprise could trigger a relief rally.
For now, the market is firmly in wait-and-see mode, and crypto remains one of the most vulnerable sectors as the macro picture evolves.
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