[Analysis] "Virtual asset market adjusts amid US economic concerns and Fed variables…excessive leverage burden persists"

Suehyeon Lee

Summary

The virtual asset market is said to have adjusted due to macro uncertainty such as US economic concerns, Fed variables, and expanding fiscal and monetary policy burdens.
Excessive leverage within the market is identified as a major risk, and it reported that about $527 million of long leveraged positions were liquidated in the past 24 hours.
Although the dollar is showing signs of stabilization, this may weaken hedging demand for alternative assets like Bitcoin and Ethereum, making it likely that cryptocurrency price volatility will continue for the time being.

The virtual asset (cryptocurrency) market, including Bitcoin (BTC) and Ethereum (ETH), has collectively undergone a correction, and this adjustment is being attributed to US economic concerns and Fed-related variables.

On the 16th (local time), Cointelegraph said, "This correction is interpreted as stemming from renewed worries about the US economic situation," adding, "a recent survey showed growing perceptions that US economic conditions are deteriorating, and changing expectations around candidates for the next US Federal Reserve (Fed) chair also increased market volatility."

Expanding fiscal burdens are also putting pressure on the market. Tax credits were extended under the 'One Big Beautiful Bill Act', the US debt limit was raised by $5 trillion, and the Fed decided to expand its balance sheet by $40 billion per month, leading to assessments that fiscal and monetary policy burdens are increasing simultaneously.

Signs of slowing consumer spending are another concern. According to a CNBC survey, 41% of Americans said they would reduce spending by the end of this year, an increase from last year. 61% of respondents cited weakened purchasing power due to wage stagnation relative to rising prices. The market is watching US retail sales and employment data scheduled for release that day.

Internally within the virtual asset market, excessive leverage remains a key risk. derivatives open interest stands at around $135 billion, and approximately $527 million of long leveraged positions were liquidated in the past 24 hours. Moves to increase cash allocations amid weakness in the artificial intelligence (AI) sector are also weighing on risk assets broadly.

Meanwhile, the dollar has stopped weakening and appears to be stabilizing. The US Dollar Index (DXY) has found support around the 98 level and is attempting a rebound. While this is positive in terms of easing recession concerns, analysts say it could negatively affect hedging demand for alternative assets such as Bitcoin and Ethereum. Market participants see a high likelihood that cryptocurrency price volatility will continue until high leverage and macro uncertainty are resolved.