Bitcoin News Today: Fed's $100B loss sparks Bitcoin surge as crypto market contracts $100B

The U.S. Federal Reserve’s reported $100 billion loss in mid-2025 has intensified scrutiny of its monetary policy framework, with critics and crypto advocates linking the setback to prolonged high-interest-rate environments. The loss, attributed to elevated costs from interest payments on reserves and reverse repo operations under Chair Jerome Powell’s leadership, has sparked debates about the long-term sustainability of traditional fiat systems. Treasury Secretary Scott Bessent has called for a comprehensive review of the Fed’s practices, comparing the scale of errors to failures that would trigger immediate investigations in other federal agencies [1]. This financial strain coincided with a surge in Bitcoin adoption, as institutional and retail investors increasingly viewed the cryptocurrency as a decentralized alternative to central banking. Proponents highlight Bitcoin’s capped supply of 21 million coins as an inherent safeguard against inflationary pressures, contrasting it with the Fed’s struggles to stabilize inflation amid bond market dynamics [2].

Bitcoin’s rising profile was further amplified by the Fed’s decision to pause rate hikes, which stabilized yields and weakened the U.S. dollar, creating a favorable environment for risk assets. Institutional inflows, particularly through Bitcoin futures-based ETFs, underscored the asset’s growing role in hedging against currency devaluation risks [1]. Major asset managers like BlackRock and Fidelity contributed to a $5 billion surge in institutional inflows into Bitcoin futures ETFs, signaling shifting investor preferences toward decentralized finance. However, the crypto market’s volatility exposed vulnerabilities in this narrative. Following a failed attempt to breach the $120,000 resistance level in 2025, Bitcoin’s price dipped below $116,000, triggering a $100 billion contraction in the crypto market. This decline, driven by altcoin liquidations, highlighted the sector’s sensitivity to macroeconomic shifts [1]. Analysts noted that while Bitcoin’s narrative as a hedge against central bank failures is gaining traction, its speculative nature and scalability challenges limit its immediate viability as a mainstream alternative [1].

The interplay between the Fed’s losses and Bitcoin’s trajectory reflects broader structural uncertainties in global finance. A Brookings policy analysis observed that regulatory easing in crypto markets has created a “less stable fiat environment,” potentially benefiting the sector as confidence in traditional systems wanes [2]. Yet, the Fed’s policy crossroads—balancing inflation control with restoring trust in its tools—will shape the trajectory of global capital flows. Investors are advised to approach both markets with caution, as the interplay of policy uncertainties and digital asset volatility continues to reshape the financial landscape.

Sources:

[1] Over $100B Gone From Crypto Markets as Altcoins Get Obliterated [https://cryptoadventure.com/over-100b-gone-from-crypto-markets-as-altcoins-get-obliterated-market-watch]

[2] Munich RE: We’ve Reached Peak Valuation [https://seekingalpha.com/article/4804102-munich-re-weve-reached-peak-valuation]