Fed's Waller Attributes Crypto Sell-Off to TradFi Entry, Regulatory Gridlock

VADODARA, February 10, 2026 — Federal Reserve Governor Christopher Waller delivered a sobering assessment of cryptocurrency markets, attributing the recent sell-off to traditional financial institutions adjusting risk positions rather than retail panic. This latest crypto news reveals a fundamental shift in market dynamics as institutional players dominate price action.

Investigation: The Fed's Diagnosis of Market Cooling

According to a February 9 statement reported by Cointelegraph, Waller identified two primary catalysts for current market conditions. First, he noted that post-election enthusiasm following President Donald Trump's victory has dissipated. Second, and more significantly, he pointed to traditional financial institutions entering crypto markets and adjusting their risk exposure as the driver behind recent selling pressure.

Waller specifically highlighted Congressional inaction on crypto market structure legislation as exacerbating regulatory uncertainty. This policy vacuum, according to his analysis, has dampened investor sentiment across both retail and institutional segments. Meanwhile, the Fed announced plans to introduce a "payment accounts" system this year, granting fintech and crypto companies limited access to central bank infrastructure without interest accrual or balance limits.

Market Context & Historical Precedent

Historically, crypto market sell-offs have followed predictable retail-driven patterns. The 2018 bear market saw retail capitulation dominate price action, while the 2022 downturn featured significant leverage unwinding. In contrast, current market structure suggests institutional portfolio rebalancing is the primary driver.

Market analysts question whether this represents a healthy correction or the beginning of a more prolonged downturn. The failure to pass comprehensive legislation creates what traders call a "regulatory Fair Value Gap" where price discovery becomes distorted by uncertainty premiums. Consequently, traditional finance entry may be creating what on-chain analysts describe as a "liquidity grab" at key support levels.

Related developments in institutional crypto adoption continue despite regulatory headwinds. Spot Bitcoin ETFs have seen significant inflows even during this period of market stress, while Ethereum ETFs have experienced their own institutional interest. These flows contradict the narrative of uniform institutional selling.

Technical Architecture & Price Action

Market structure suggests Bitcoin is testing critical Fibonacci support at the 0.618 retracement level of $68,788. This coincides with a significant volume profile node where institutional order flow typically concentrates. The Relative Strength Index (RSI) currently sits at 32, indicating oversold conditions but not yet extreme capitulation.

On-chain data from Glassnode indicates long-term holder supply has remained relatively stable despite price declines, suggesting the sell-off is concentrated among newer market participants and institutional traders. The 200-day moving average at $72,500 now acts as resistance, creating what technical analysts call an "order block" that must be reclaimed for bullish momentum to resume.

, Ethereum's network activity shows declining gas fees and reduced DeFi utilization, indicating broader market stress beyond just Bitcoin price action. The Federal Reserve's proposed payment accounts system could eventually reduce settlement friction, but current implementation details remain vague according to official Federal Reserve documentation.

By The Numbers

Why It Matters

This shift from retail-driven to institutionally-dominated markets represents a fundamental change in crypto market structure. Traditional finance entry creates different volatility patterns, with larger but less frequent moves as institutions manage portfolio risk rather than chase short-term gains. Regulatory uncertainty acts as a persistent discount factor on valuations until clarity emerges.

The Fed's payment accounts initiative could eventually reduce counterparty risk in crypto settlements, but its limited scope (no interest, balance caps) suggests cautious experimentation rather than full embrace. Market structure now depends more on quarterly rebalancing by pension funds and asset managers than on social media sentiment or retail inflows.

Expert Commentary

"Governor Waller's analysis identifies the correct symptom—institutional risk management—but may misdiagnose the underlying disease. The real issue isn't that institutions are selling; it's that regulatory uncertainty prevents them from establishing clear valuation frameworks. Until Congress provides legislative clarity, we'll see continued choppy price action as traditional finance navigates uncharted territory."— CoinMarketBuzz Intelligence Desk

Market Outlook & Price Scenarios

Two primary technical scenarios emerge from current market structure. The bullish case requires reclaiming the 200-day moving average and breaking above $75,000 resistance. The bearish scenario involves breaking below the Fibonacci 0.786 level at $65,000, which would trigger further institutional de-risking.

• Bullish Invalidation Level: $75,000. A sustained break above this resistance zone would invalidate the current downtrend structure and signal institutional accumulation rather than distribution.
• Bearish Invalidation Level: $65,000. A breakdown below this Fibonacci support would confirm the sell-off has transitioned from healthy correction to structural bear market, potentially triggering what options traders call a "gamma squeeze" to the downside.

The 12-month outlook depends heavily on regulatory developments. If Congress passes market structure legislation, institutional allocation could increase significantly. Without clarity, traditional finance may remain cautious, keeping volatility elevated despite reduced retail participation. The Fed's payment accounts system represents a potential positive catalyst, but its impact will be limited initially due to balance restrictions.