Fed Fears Trigger $120B Crypto Bloodbath - Here’s What You Need to Know Before Friday

Digital asset markets just got rocked by the most brutal selloff of the year as Powell's upcoming speech sends tremors through risk assets.

The entire crypto complex bled out in synchronized fashion - no coin was spared from the algorithmic liquidation cascade.

Traders are pricing in hawkish Fed rhetoric that could extend the pain through quarter-end.

Meanwhile, Wall Street's 'risk management' teams are probably just now discovering their crypto exposure exists.

Crypto Markets Seeking Confirmation

He added that markets now believe rate cuts are no longer a guarantee for September, and if Powell hints that they may not be implemented, the bearishness will likely continue. However, “if Powell comes in soft and leans that rate cuts are likely, we TURBO rip,” he said.

If there are no rate reductions for September, “it’ll be an ugly 4-6 weeks until we have clarity for October potential cuts.”

“Market HATES uncertainty and we are seeing that in the price action right now.”

The probability of a Sept. 17 rate cut is still a high 85% according to the CME Fed Watch Tool, which is based on futures markets. However, this could drop sharply if Powell is hawkish on Friday.

President Trump, who has been highly critical of the central bank chair, calling him “too late,” said, “There is no inflation, and every sign is pointing to a major rate cut.”

BREAKING: President TRUMP asks for somebody to “inform Jerome ‘Too Late’ Powell that he is hurting the housing industry.” pic.twitter.com/jJY4lMg22J

— The Kobeissi Letter (@KobeissiLetter) August 19, 2025

“We are in this uncomfortable equilibrium, where we don’t know where things go next,” Gennadiy Goldberg, chief rates strategist at TD Securities, told the Financial Times on Tuesday.

“The market wants a bit of confirmation from Powell on Friday as to whether he is open to cutting rates.”

A lower interest rate environment means cheaper borrowing and more liquidity available for risk-on assets such as cryptocurrencies.

Crypto Sentiment Flickers

Crypto sentiment is very volatile and flips in minutes, observed bitcoin Magazine founder David Bailey, who said:

“One of the most hilarious aspects of Bitcoin is sentiment. It flickers like a flame. One moment euphoria, moments later panic. Many Bitcoin have exchanged hands through such emotions.”

Meanwhile, Santiment reported that retail traders have “done a complete 180 after Bitcoin has failed to rally and dipped below $113K.” It noted that the past 24 hours have marked the most “bearish sentiment seen on social media” since geopolitical conflict in the Middle East caused panic selling in late June.

BTC had recovered slightly to trade at $113,520 at the time of writing as its next direction hinges on Friday’s Fed speech.