The cryptocurrency market faced a significant downturn late Thursday, reversing earlier stability and highlighting the sector's sensitivity to macroeconomic and geopolitical pressures. This selloff followed a period of contemplation after the U.S. Federal Reserve's decision on Wednesday to hold benchmark interest rates steady in the 4.25%-4.50% range. While the Fed's move was widely anticipated, their updated economic projections painted a complex picture for traders. The central bank maintained its forecast for 50 basis points in rate cuts for 2025 but signaled a more hawkish long-term stance with fewer cuts projected for 2026 and 2027. Policymakers also revised their economic outlook, lowering GDP growth forecasts to 1.4% for the year while raising inflation expectations. Immediately following the announcement, Bitcoin (BTC) showed little volatility, hovering around $104,200, suggesting the market had priced in the decision. However, this calm proved to be temporary as new catalysts emerged.

Geopolitical Tensions Trigger Broad Market Selloff

Risk assets, including cryptocurrencies, came under heavy pressure on Thursday as geopolitical tensions escalated. According to reports from The Kobeissi Letter, comments from President Trump regarding potential new tariffs and the heightened risk of conflict in the Middle East soured market sentiment. While U.S. equities managed to absorb the news and close with modest gains, the digital asset market was not as resilient. Bitcoin experienced a sharp decline in the early U.S. evening hours, falling over 2.5% to slide below the $106,000 mark. Trading data shows BTC/USDT hitting a 24-hour high of $108,746.16 before succumbing to selling pressure and establishing a low of $106,766.08. This price action underscores a key support zone that traders are now watching closely. A failure to hold this level could open the door to a deeper correction, erasing recent gains.

Altcoins Bear the Brunt of the Decline

The downturn was far more pronounced in the altcoin market, where major tokens experienced substantial losses. Ether (ETH), the second-largest cryptocurrency, saw its price on the ETH/USDT pair fluctuate between a high of $2,522.57 and a low of $2,414.29, representing a significant intraday range and a test of critical support. Other large-cap altcoins like Solana (SOL), XRP, and Dogecoin (DOGE) saw declines ranging from 5% to 7%, indicating a flight to relative safety within the crypto space, primarily towards Bitcoin. Solana's SOL/USDT pair saw a high of $159.88 before dropping to a low of $149.70, putting the key $150 psychological support level under duress. Interestingly, the ETH/BTC pair showed some relative strength, climbing 2.87% to 0.02326 BTC, suggesting that some traders were rotating out of smaller altcoins and even Bitcoin into Ether, despite its drop against the dollar. XRP also saw significant volatility, with the XRP/USDT pair trading between $2.1676 and a high of $2.2696.

Conflicting Economic Signals Create Uncertainty

The market is currently navigating a complex web of conflicting economic data, adding another layer of uncertainty for traders. While the Federal Reserve remains publicly committed to a hawkish stance to combat what it calls "somewhat elevated" inflation, recent economic indicators suggest a weakening economy that may eventually force a policy pivot. On Thursday, the Producer Price Index (PPI) for May came in softer than expected, and initial jobless claims remained elevated at 248,000, matching a multi-month high. Furthermore, continuing jobless claims rose for the third consecutive week to 1.956 million, the highest level since November 2021. This data, combined with political pressure on the Fed to adopt a more dovish posture, creates a challenging environment. The divergence between a recovering stock market and a falling crypto market on Thursday suggests that digital assets are currently being treated as a high-beta play on global liquidity and geopolitical risk, rather than as an inflation hedge.

For traders, the immediate focus will be on key technical levels. For Bitcoin, the $106,500-$106,700 zone, which marked the 24-hour low, is now the first line of defense. A sustained break below this area could signal a move towards the $104,000 level tested earlier in the week. For Ether, holding the $2,400 support is paramount to prevent a cascade of further selling. The broader market's direction will likely be dictated by the interplay between the Fed's data-dependent approach and the unpredictable nature of geopolitical events. While the dot plot provides a roadmap, traders must remain vigilant as headlines can quickly override central bank projections, as demonstrated by Thursday's sharp, late-day decline across the crypto landscape.