Federal Reserve Governor Warsh: The optimism in the cryptocurrency market is fading, institutional deleveraging and uncertainty exacerbating volatility.

Federal Reserve Board member Waller said on Monday that the optimism in the market that was boosted by Trump's election is fading along with recent selloffs impacting cryptocurrency assets. Waller stated that the recent extreme volatility is related to regulatory uncertainty and risk management adjustments by large financial institutions. Waller pointed out that fluctuations in the cryptocurrency market are normal, but this time the volatility highlights the deep "entanglement" of this sector with the traditional financial system. With hedge funds, exchanges, and exchange-traded funds (ETFs) continuing to enter the market, cryptocurrency assets are no longer just a market dominated by retail investors, and their policy focus is also increasing. From a market perspective, Bitcoin has fallen more than 40% from its October high. Last week, Bitcoin briefly fell to $60,033, hitting a new low since October 2024, and triggering the largest volatility surge since FTX collapsed in 2022. Although it rebounded to around $70,000 later, the derivatives market still signals caution. Data shows that the funding rate for Bitcoin perpetual contracts remains negative, reflecting traders' defensive positioning against downside risks or requiring additional compensation to hold long positions. At the same time, the open interest size has not recovered since declining from October, shrinking by about 50% from its peak, indicating a lack of strong consensus in this rebound. The options market is also leaning towards caution. The implied volatility of Bitcoin has fallen from around 83% last Thursday to around 60% currently, indicating a cooling expectation for large short-term fluctuations, but the 25-delta skew towards put options remains significant, showing persistent demand for downside protection. Industry insiders point out that reducing leverage can help reduce volatility and stabilize prices, but it also means that many investors choose to take profits or risks at lower levels, adopting a wait-and-see approach or temporarily leaving the market. Macro-level uncertainty further reinforces cautious sentiment. Market participants are facing a series of potential "disturbances," including changes in the Japanese political situation, fluctuations in precious metal prices, and the sustainability of the stock market rally around the AI theme. With multiple risks intertwined, analysts believe that the market, currently dominated by bearish sentiment, is more likely to enter a consolidating phase rather than a quick reversal to the upside.