Fed Blocks Crypto Bank, Sparking "Gensler 2.0" Fears

Bitcoin Struggles as Sell-Off Pushes Price Below $73,000, Igniting Correction Fears

Bitcoin is grappling to regain stability following a sharp sell-off that sent its price tumbling below the $73,000 mark. The significant decline resulted in the liquidation of hundreds of millions of dollars in leveraged positions, raising concerns that the market may be entering a more profound correction phase.

The cryptocurrency is currently trading around $73,600, having briefly dipped below $73,000. Ethereum also saw a decline, falling below $2,100, while XRP hovered near $1.05 and Solana struggled to maintain its $82 level. In the past 24 hours, over $723 million in cryptocurrency positions were liquidated, with nearly 79% of these being long bets.

Economic Headwinds and Regulatory Uncertainty

The timing of this downturn is particularly challenging for Bitcoin proponents. A higher-than-expected US inflation report in October has reignited concerns about interest rates, while recent US election outcomes have introduced a new layer of regulatory ambiguity. Adding to the pressure, a dispute involving the Federal Reserve is further complicating the landscape.

Several factors are contributing to the market’s downward pressure. The US Consumer Price Index (CPI) for October rose by 0.4% month-over-month, surpassing economists’ forecasts of 0.3%. Core inflation also increased by 0.3%, exceeding the projected 0.2%.

The outlook for interest rates has become increasingly concerning. According to CME’s latest rate probability data, the likelihood of the Federal Reserve maintaining its target rate unchanged at 3.75%–4% has dropped to zero. This marks a dramatic shift from just a day prior, when the probability of unchanged rates stood at 16%, and a week ago at 17.3%, and a month ago at 15.9%.

Markets are now pricing in an 86.3% probability of a 25-basis-point rate hike, which would push the target range to 4%–4.25%. An additional 13.7% probability exists for a larger 50-basis-point increase.

Liquidation Data and Technical Breakdowns

The liquidation data presents an equally unsettling picture. CoinGlass reported $732 million in forced liquidations across cryptocurrency markets on November 11. Long positions constituted $578 million, indicating that traders betting on price increases bore the brunt of the losses.

Bitcoin also lost its 50-week moving average, which was situated near $76,100, ending a seven-week streak above this key technical level. This breakdown followed a week of significant institutional selling, with US spot Bitcoin ETFs experiencing approximately $1.28 billion in net outflows.

The combination of ETF withdrawals, leveraged liquidations, and inflation-related uncertainty has created a challenging environment for buyers. While some social media commentary has pushed back against characterizing the move as a full-blown crash, drawing comparisons to the Nasdaq’s monthly declines, the loss of critical technical levels has emboldened bearish sentiment.

Political Anxiety and Regulatory Scrutiny

Bitcoin’s price struggles are unfolding against a backdrop of renewed political anxiety. The recent US midterm election results have bolstered Democratic influence in Congress, prompting questions about the future trajectory of cryptocurrency regulation.

The crypto community is increasingly contemplating the possibility of a “Gensler 2.0” regulatory environment. The primary concern is whether a more stringent approach could be implemented for digital asset companies, particularly affecting decentralized autonomous organizations (DAOs), digital asset treasuries (DATs), memecoins, and privacy-focused cryptocurrencies.

The potential for increased regulatory uncertainty could hinder efforts to establish clearer rules for the industry. While tokenization and stablecoin initiatives might continue under existing frameworks, heightened Democratic oversight could slow down new legislation and challenge the stability of current regulatory guidance.

Federal Reserve’s Stance on Crypto Banking

In parallel, Old Glory Bank CEO Mike Ring has accused the Federal Reserve of obstructing his institution’s crypto-integrated banking launch at the eleventh hour. Ring’s public comments suggest that the central bank remains resistant to crypto-friendly banking initiatives, describing the setback as evidence of the Fed’s hostility towards the sector. Old Glory Bank is reportedly exploring an alternative launch strategy that may not require the same level of Federal Reserve approval, potentially targeting the first quarter of 2027.

Outlook for Bitcoin

The immediate challenge for Bitcoin’s price is to reclaim the $75,000 level and rebuild market confidence following the recent wave of liquidations. A further decline could place additional pressure on already cautious traders.

However, the long-term investment thesis for Bitcoin has not necessarily evaporated. Persistent concerns regarding government spending, monetary debasement, and currency purchasing power continue to support the argument for holding scarce digital assets.