Cryptocurrency markets experienced significant drops on Tuesday, but indications of easing from the Federal Reserve helped prices recover from their lowest points. A late-day post from President Trump on Truth Social served as a reminder to bullish investors that he can influence asset prices at any moment.
Bitcoin fell to as low as $109,800 during the early U.S. session on Tuesday after dropping from nearly $116,000 overnight. It has since recovered to $112,600, down 2.8% over the last 24 hours. Ether decreased by 4%, while BNB, XRP, and Dogecoin dropped between 4% and 6% during the same timeframe. The broad CoinDesk 20 Index fell by 3.2%.
Prices found some stability after Fed Chair Jerome Powell indicated that the central bank is nearing the conclusion of its quantitative tightening (QT) cycle, which involves reducing its bond holdings. He also mentioned signs of a cooling labor market and increasing employment risks, suggesting another rate cut might occur later this month.
U.S. equity markets reacted sharply, with the Nasdaq and S&P 500 recovering from initial losses to briefly turn positive before closing down by 0.75% and 0.15%, respectively.
However, part of the day’s rebound in both crypto and equities was quickly undone in the final minutes of trading after President Trump tweeted on Truth Social about potentially restricting cooking oil imports from China unless that country increases its soybean purchases.
Mining stocks remain in demand
Crypto mining stocks once again led the surge in digital asset equities as investors anticipate that the rising demand for computing power driven by artificial intelligence (AI) will benefit these companies. Bitfarms (BITF), Cleanspark (CLSK), Iren (IREN), Marathon Digital (MARA), and TeraWulf (WULF) each saw gains of over 10% on the day.
Leverage flush favors Bitcoin accumulation
Even though the rebound from last week’s flash crash lost momentum on Tuesday, Vetle Lunde, head of research at K33, perceives the current dip as a constructive opportunity, with Bitcoin stabilizing following a significant leverage reset.
“We now view the current levels as attractive for increasing Bitcoin exposure as leverage has been dramatically cleared,” he stated in a Tuesday note. He emphasized that liquidity is likely to remain low in the short term as traders recover from forced selling but noted that such unwinds have historically indicated market bottoms.
“We view current levels as appealing for increasing Bitcoin exposure, as leverage has been substantially cleared,” he added. “With a supportive environment that includes expectations for accommodating policy, high institutional interest, and upcoming ETF catalysts, the conditions are favorable for gradual accumulation.
