Federal Reserve Policy Shift: The Truth Behind Precious Metals and Cryptocurrencies Once Again Slipping

By the end of 2025, after the announcement of the Federal Reserve Chairperson candidate, the market experienced a dramatic shift in expectations. The widely anticipated interest rate cut cycle turned out to be a mirage, and the precious metals market underwent a shocking correction within just 36 hours. Gold prices rapidly retreated from their historical highs, and silver’s decline was even more astonishing. But this is not the end of the story; it marks the beginning of a larger game in the financial markets — revealing a brutal truth: blindly following policy expectations will ultimately lead to ruthless harvests. In the cryptocurrency market, this “constant diarrhea” phenomenon is even more evident.

Hawkish New Chair Takes Office: Why Are Precious Metals Continually Weak

At the end of 2025, the Trump administration nominated Kevin Warsh as Federal Reserve Chair. This news shook global financial markets.

Who is Warsh? During his tenure as a Fed governor, he openly opposed Bernanke’s quantitative easing policies. He publicly criticized QE and was recognized as a hawkish representative within the Fed. The market had expected Trump’s presidency to bring a rate-cutting cycle, but Warsh’s appointment signaled the exact opposite — tightening would become the main tone.

How powerful is this shift? The precious metals market responded with concrete actions. Gold plummeted from its historical high, and silver’s decline was even more alarming. Countless investors entered at the peak, expecting prices to continue rising, only to be trapped. This is not just simple market volatility; it’s an extreme flash crash caused by liquidity drying up — when bulls collectively stampede, no one wants to take the other side.

Chain Reaction of Expectation Collapse: Why Retail Investors Are Always Cut at the Top

There is a deep psychological principle behind this phenomenon. The more enthusiastic investors are, the more desperate they become when the market crashes.

Previously, the entire market bet on a story: Trump takes office → USD depreciates → inflation surges → safe-haven assets skyrocket. Based on this logic, from institutions to retail investors, everyone was frantically leveraging to position in precious metals. Capital inflows pushed prices higher, which attracted more funds, forming a classic bubble.

But when Kevin Warsh, the “hawkish coach,” took office, the story instantly reversed. The balance sheet reduction could be more aggressive than anyone, and rate cuts were out of the question. Once expectations collapsed, bulls stampeded collectively, and highly leveraged speculators were wiped out instantly. Those investors who thought they were bottom-fishing were actually caught in the middle of the climb. That’s why precious metals have been constantly weak and falling with no power to resist.

The Top of the Precious Metals Cycle and the Persistent Weakness in Cryptocurrency

To understand the essence of this correction, we must look at long-term cycles. The current gold bull market began in 2016 and has lasted ten years. The previous major bull in precious metals peaked in 2011, after which it took four years for gold to halve and silver to drop 80%.

These two super bull markets are actually the first two waves after the 20-year bear market from 1980 to 2000. According to wave theory, this current cycle is also nearing the top of the second wave. Although a third wave might still be possible theoretically, the magnitude and duration of this rally have already exhausted much of the upward potential.

The cryptocurrency market reacts even more sensitively. When precious metals plunge, investor confidence wavers, and risk appetite declines. BTC and ETH are the first to be affected. Among them, ETH’s performance is especially weak — it has been under pressure continuously. This is not accidental but reflects the market’s overall pessimistic outlook on safe-haven assets. In this context, even if BTC experiences a short-term rebound, ETH remains weak, unable to keep pace with mainstream coins.

Key Technical Levels in the Current Cryptocurrency Market

As of February 2026, BTC is around $70,000, significantly down from its peak at the end of 2025. The market needs to watch several key levels:

Bitcoin’s defense line: If BTC can regain and hold above $85,000, it indicates weakening of the bears and a potential market turnaround. But if it repeatedly stalls in the $84,500–$85,500 range, a second decline could be imminent. The strong support below is at $80,600; if it breaks and cannot recover, risks will increase sharply.

Ethereum’s dilemma: ETH’s weak performance is undeniable. It lacks capital inflow and is heavily drained by BTC. The critical resistance is around $2,700, with support at $2,500. Unless ETH can break through the resistance and stabilize, the downtrend will continue.

How to Make Correct Decisions in a Continually Weak Market

In such a market, the core principle is simple: manage your positions well and let go of the obsession with perfect timing.

Long strategies: Wait for clear technical bottom signals before entering. For BTC, if it drops to around $80,600 and quickly rebounds, that could be a good entry point. Or wait for a strong breakout above $84,000 before considering to buy. Never chase the market in weakness.

Short strategies: When key resistance levels are repeatedly pushed back, that’s an opportunity to short. For BTC, if it faces persistent resistance near $85,000, consider short positions. But remember, once BTC stabilizes above $85,000, stop-loss and exit are essential — don’t hold onto false hopes.

Risk management: Whether going long or short, set stop-loss levels in advance. If BTC drops below $80,600 with high volume and cannot recover, don’t keep averaging down; the downside could be large. If you already hold long positions, be prepared for drawdowns, and consider scaling out rather than closing all at once.

The same logic applies to ETH: it’s always weak and depends heavily on BTC’s direction. If BTC cannot hold, ETH will likely continue to fall. Only when BTC shows clear bottoming signals should you consider entering ETH positions.

The New Market Game Has Just Begun

Kevin Warsh’s appointment is not the end of bad news nor the start of good news, but the beginning of a new round of competition. The sharp decline in precious metals has already taught everyone a lesson: Relying on policy expectations for speculation is ultimately a dangerous game; only by focusing on real economic fundamentals and technical signals, and maintaining strict position control, can one survive this cycle.

There are no guaranteed winning strategies in the market—only a reverence for risk and discipline. The ongoing weakness will pass, but investors who blindly gamble will never learn this lesson. Staggered positioning, risk control, and following signals — this is not radical; it’s survival. Even with limited capital, through scientific position management and long-term accumulation, wealth can gradually grow.

Opportunities in the crypto space are always there, but only if your capital is still alive.