Crypto Moves in Lockstep With Fed Signals as Macro Data Sets the Tone

In the biggest week of liquidations this year, nearly $3.2bn in positions were cleared across Bitcoin (BTC), Ether (ETH), and Solana (SOL). Two waves, on Monday and Thursday, drove the bulk of the sell-off as leveraged positions that investors had borrowed to build were shut down. 

While the initial dip stemmed from macro uncertainty, pressure intensified after US Federal Reserve Chair Jerome Powell re-emphasized a cautious, data-driven approach following the Fed's recent 0.25% rate cut.

After Powell’s speech last Tuesday, the major coins posted modest declines (BTC –0.7%, ETH –0.5%, SOL –2.5%), reflecting a cautious tone. Across the week, Bitcoin, Ether, and Solana each reacted in sequence to key macro prints, with all moves measured over the six hours following the event. On Thursday, a surprisingly strong Q3 US GDP estimate triggered sharper six-hour losses in BTC (–1.5%) and ETH (–1.7%), while Solana briefly diverged (+1.0%), though the bounce proved short-lived. Finally, Friday's in-line US PCE print, essentially a gauge of inflation in the world's largest economy, sparked a rebound (BTC +1.0%, ETH +3.9%, SOL +4.1%) over the subsequent six hours.

The sequence underscores a clear market dynamic: crypto remains highly sensitive to the Fed’s policy path. Better-than-expected growth reduces the urgency for rate cuts, keeping real yields elevated and liquidity tight, conditions that weigh on risk assets. By contrast, an in-line inflation reading was insufficient to shift sentiment, as it did not raise the odds of aggressive easing by the Fed: the central bank would probably not embark on more significant or frequent rate reductions after seeing those figures. 

With inflation expectations relatively stable, investors are increasingly focused on labour and growth data as the decisive inputs for policy. For now, traders appear to be waiting for unequivocal signs of Fed dovishness – an inclination to ease rates – before re-engaging in risk.

Alongside a dual mandate of stabilizing inflation and supporting employment, Powell and other officials have acknowledged a policy dilemma: inflation remains elevated, but signs of labour market deterioration are pushing the Fed to weigh more accommodative policy. If this dynamic holds, upcoming JOLTS job openings and unemployment data will be pivotal to monitor this week. Positive surprises could extend bearish pressure on crypto, while weaker prints may be read as bullish if they push the Fed closer to easing.