The cryptocurrency market faced a significant downturn late Thursday, as broad-based selling pressure pushed Bitcoin (BTC) below the $106,000 mark before a slight recovery. While Bitcoin's 24-hour drop was contained to roughly 2.5%, the pain was far more acute in the altcoin market. Major tokens including Ether (ETH), Solana (SOL), XRP, and Dogecoin (DOGE) registered steep declines ranging from 5% to 7%. This risk-off sentiment was initially triggered by renewed geopolitical anxieties, including President Trump's warnings of a potential conflict with Iran and the looming July 9 deadline for trade deal finalizations, which could usher in heavy tariffs. Despite U.S. equities managing to shake off the early jitters and close with modest gains, the digital asset space was not as fortunate, highlighting its current sensitivity to macroeconomic and geopolitical headwinds. As of the latest readings, BTC/USDT was trading around $107,945, struggling to reclaim higher ground after its dip.

Macro Catalysts Dominate the Week Ahead for BTC

As traders navigate the choppy waters, all eyes turn to a pivotal week of macroeconomic events that could either fuel a recovery or exacerbate the recent sell-off. The central event will be Federal Reserve Chairman Jerome Powell's semi-annual monetary policy testimony before Congress. The market is desperate for any dovish signals, especially after a series of weaker economic data points, including softer Producer Price Index figures and stubbornly high initial jobless claims, which recently matched a multi-month high of 248,000. These figures suggest emerging cracks in the U.S. economy that could compel the Fed to reconsider its hawkish stance. According to Chris Weston, head of research at Pepperstone, "With the market's pricing of future inflation well anchored, early cracks emerging in the labor market and housing activity evidently weak, there are reasons for the Fed to consider adopting a dovish shift in the July FOMC meeting and guiding towards a cut in September."

Powell's Testimony and Core PCE Data Under Scrutiny

Powell is expected to maintain a data-dependent approach, but any deviation from this script will be heavily scrutinized. His commentary will be weighed against recent remarks from Fed Governor Christopher Waller, who hinted that an interest rate reduction in July could be possible. A dovish tilt from the Fed chair could inject fresh liquidity and risk appetite into the markets, providing a significant tailwind for assets like Bitcoin, which has managed to hold the critical $100,000 support level throughout recent turmoil. The other marquee event is Friday's release of the core Personal Consumption Expenditures (PCE) price index, the Fed's preferred inflation gauge. The consensus forecast is for a benign 0.1% month-on-month increase, which would support the case for rate cuts. However, analysts at ING offer a more cautious perspective, suggesting clarity on the inflationary impact of tariffs may not arrive until December, leading to just one potential rate cut this year.

Altcoin Weakness and Bitcoin's Relative Strength

The recent price action provides a clear illustration of market dynamics during periods of uncertainty. While Bitcoin's dip to sub-$106,000 levels was notable, the amplified losses in altcoins signal a flight to relative safety within the crypto ecosystem. Ether, the second-largest cryptocurrency, saw its price fall to around $2,521 on the ETH/USDT pair, a decline of over 1%. Solana was hit harder, with SOL/USDT dropping to $150.38, losing 1.38% over 24 hours. This divergence underscores Bitcoin's role as the market's primary reserve asset. When fear grips the market, capital tends to flow from more speculative altcoins back into BTC. Traders will be closely watching the BTC dominance chart for further clues on market sentiment. A sustained rise in dominance alongside a falling or sideways BTC price would confirm this defensive rotation. For now, the key level for BTC traders to watch is the $105,000-$106,000 zone, which has flipped from support to immediate resistance. A decisive break above this area could signal a resumption of the uptrend, while failure to do so may invite a retest of lower supports.