The crypto market remained in a downtrend on Thursday, dropping nearly 3% to $2.35 trillion due to a confluence of macroeconomic uncertainty and geopolitical tensions that spooked investors.

Bitcoin (BTC), the world’s largest crypto asset, fell 3.5% to around $65,900 before experiencing a partial recovery back above $66,700 at press time. Ethereum (ETH) was down 1.6% after losing the $2,000 key support level, while other major cryptos such as $XRP ($XRP), $BNB ($BNB), Solana (SOL), and Dogecoin (DOGE) were also in the red, posting losses between 1% and 4%.

Some of the top laggards of the day were Provenance Blockchain (HASH), Zcash (ZEC), and Memecore (M).

The latest slide triggered a liquidation wave, with the open interest of the total market falling by 0.71%. Data from SoSoValue show that in the past 24 hours, over $224 million worth of positions were liquidated from the futures market, with roughly $164 million coming from long positions.

At the same time, the crypto fear and greed index, a metric investors use to gauge the general sentiment of the market, remained in the extreme fear thresholds.

FOMC minutes cast doubt about future rate cuts

The crypto market tanked on Thursday after the FOMC minutes report on Feb. 19, which revealed uncertainty over more rate cuts moving into the coming months. This shifting stance could set the Federal Reserve on a direct collision course with President Donald Trump, who has consistently pressured for aggressive rate cuts. It also complicates the path for Trump’s nominee for Fed chair, Kevin Warsh.

According to market predictions platform Polymarket, the odds of no changes in rate cuts for the next FOMC meeting in March have increased to 93% at the time of writing. Cryptocurrency prices have historically fallen back or remained suppressed when the Fed sets a hawkish tone surrounding interest rate policies.

U.S.-Iran war tensions

Investors also remain wary of a potential full-scale war between the United States and Iran. According to recent reports, the United States and Israel are planning a potential joint campaign to target Iran’s nuclear and missile facilities, which could escalate into a weeks-long conflict. Meanwhile, Iran has vowed to retaliate against any strikes on its territory.

When markets enter a period of geopolitical stress, such as an armed conflict, investors often rotate capital to cash and traditional safe-haven assets and, in turn, dump volatile crypto assets. Bitcoin has so far failed to establish a credible safe-haven narrative as it continues to trade as a high-beta risk asset rather than digital gold.

During this latest escalation, the premier cryptocurrency has mirrored the declines seen in tech stocks, struggling to absorb the stress bid that has instead bolstered physical gold and crude oil prices.

Bitcoin ETFs outflows hit 5-week streak

Another layer eroding retail confidence in the crypto market is the lackluster interest shown by institutional investors towards crypto ETFs, specifically majors like Bitcoin and Ethereum ETFs.

Data from SoSoValue shows that the 12 spot Bitcoin ETFs have recorded 5 straight weeks of outflows so far, with the total tally of these net withdrawals standing at over $3.6 billion within the period. Meanwhile, their Ethereum counterparts have posted outflows of over $1.2 billion.

As investor demand in these investment vehicles continues to be sluggish, it removes a key safety net of consistent institutional buying pressure that has historically stabilized prices during periods of high volatility. Without this reliable influx of capital, the market remains more vulnerable to sudden selloffs and the prevailing negative sentiment.