The new hawkish Fed Chair takes office, why do retail investors always get manipulated and lose money at the highs?

Kevin Warsh’s nomination as Federal Reserve Chair has caused a huge stir in the market. This hawkish policymaker shattered the market’s collective expectations of rate cuts and loose monetary policy. In just 36 hours, the precious metals market experienced a sharp decline, with traditional safe-haven assets like gold and silver losing over 5% in value. Many positions were liquidated at the high points, resulting in heavy losses. This reflects not only the shock of policy shifts but also the deeper reason why retail investors get trapped by psychological pitfalls.

Kevin Warsh’s Appointment Triggers Expectation Reversal, the Truth Behind the Metal Crash

The market’s collective illusion collapsed instantly when Warsh was nominated. Previously, market participants widely bet on easing policies after Trump took office—cutting rates, flooding the market with liquidity, and a weakening dollar became consensus, making precious metals the best bets. Large amounts of capital were fully leveraged and positioned, trying to profit from policy benefits.

However, Warsh’s appointment rewrote this narrative. This former Federal Reserve Board member, known for outspoken opposition to quantitative easing and even publicly criticizing former Chair Bernanke’s policies, indicates that shrinking the balance sheet rather than cutting rates is his preferred approach. The market’s misjudgment of the new chair led to a complete reversal of expectations in a short period.

Once expectations collapsed, a liquidity crisis ensued. Highly leveraged speculators faced a stampede, with long positions collectively fleeing, and margin calls triggering a cascade of liquidations. This is why precious metals experienced a “flash crash”—not due to rational revaluation, but panic selling caused by forced liquidations.

The Collective Retail Trampling and Psychological Traps: Risks Seen in Precious Metals and Crypto Markets

This plunge exposes the fundamental flaw of retail investing—overreliance on policy expectations and ignoring underlying fundamentals. When market sentiment is high, people tend to treat bubbles as fundamentals and leverage as profit. Whether it’s gold, silver, or cryptocurrencies, as long as policy expectations support rising prices, capital keeps flowing in.

But history shows us that without liquidity support, premiums are just “castles on the sand.” The tech bubble of 2000, the ICO craze of 2017, and today’s gold rush all follow the same pattern: the more extreme the expectations, the bigger the bubble; the bigger the bubble, the more devastating the burst.

Retail investors get wiped out mainly because they chase highs. They tend to enter when optimism peaks and prices are at their highest, when risks are already priced in. When expectations reverse, prices fall just as sharply, and highly leveraged positions are wiped out instantly.

Lessons from the Gold Bull Market Cycle: When Is the Real Bottom?

Looking at gold’s long-term trend, we can observe interesting patterns. From 1980 to 2000, gold experienced a 20-year bear market. After 2001, the market recovered with two bull phases. The first from 2001 to 2011, with gold peaking and then entering a four-year correction, during which it fell 50%, and silver dropped as much as 80%.

The current gold bull market started in 2016 and has lasted ten years. Based on historical cycles, the second bull wave’s top is likely near the current level. Although a third wave is theoretically possible, considering the magnitude and length of this rally, a significant correction is inevitable.

For investors, the key is to recognize where they are in the cycle. When an asset’s price increases by over 100% and hits new highs repeatedly, it’s often close to the cycle top. Entering at this point carries much higher risk than opportunity. Instead of blindly jumping in “to gamble on uncertain gains,” it’s better to patiently wait for the true bottom to form. Opportunities always exist, but if your capital is gone, it’s truly gone.

Key Support Levels for Bitcoin and Ethereum, Next Week’s Market Outlook

With the Fed’s policy expectations shifting, the crypto market is also facing adjustment pressures. According to the latest data (February 2026), Bitcoin is currently priced at $70,990, up 2.44% in 24 hours; Ethereum is at $2,090, up 0.40% in 24 hours.

From a technical perspective, Bitcoin is in a weak rebound phase. Whether it can hold above $85,000 in the short term is critical. If it cannot effectively bounce, it may test lower levels. Support is at $82,000; if broken, it could further decline toward $80,000. The market believes there may be large funds absorbing around $80,000, but if this support fails, it could drop straight to $69,000.

Ethereum’s performance is relatively weaker, mainly because capital continues to flow into Bitcoin, causing a severe “bloodsucking effect.” Without independent support, Ethereum shows continuous downward pressure. The support at $2,681 has been broken, and the next target is likely the previous low around $2,621.

Key points to watch next week:

• Bitcoin’s key upper level: $85,600. If it can break through and hold, bears need to beware of a market shift; if it fails to rise above the $84,500–$85,500 range, it’s a false rally and may retreat.
• Bitcoin’s key support: $80,600. This is a strong support level. If the price rebounds quickly, it could be a good entry point; if it breaks with high volume and cannot recover within a few hours, consider abandoning the bottom-fishing attempt.
• Ethereum’s trend: Mainly depends on Bitcoin’s performance. If Bitcoin cannot hold its support, Ethereum is likely to follow downward.

Position Management and Stop-Loss Discipline: The Long-Term Survival Rules

In the face of market uncertainty, discipline in trading is more important than predictions. For longs, the safest entry point is waiting near $80,600 for a quick rebound or waiting for Bitcoin to break above $84,148 strongly before adding. For shorts, consider entering if Bitcoin breaks below $83,921 without rebounding, or if it fails to break through the $84,500–$85,500 resistance zone.

For traders already in positions, remember: short positions should be closed when Bitcoin stabilizes above $85,600; otherwise, they risk being reversed out. Long positions should not be closed immediately if Bitcoin drops below $80,600 with high volume and doesn’t recover; instead, judge based on further downward momentum. Ethereum trading is similar: hold if it recovers above $2,712; otherwise, stay on the sidelines. Aggressive traders can try small rebounds around $2,561, but must cut losses at $2,523.

Core principle: everything is referenced to Bitcoin. If it breaks above $85,600, market sentiment may improve; if it falls below $80,600 and doesn’t recover, the trend may be irreversible. Don’t rush to load up; wait until the price reaches key levels, then assess the direction. Always clarify in advance at which price you will accept a loss if wrong, and stick to it.

In the Era of Kevin Warsh, Policy Battles Have Begun

Warsh’s appointment is not the end of bad news nor the start of good news, but the beginning of a new round of policy battles. The precious metals crash has taught the market a valuable lesson: speculating on policy expectations is risky; only focusing on solid fundamentals and proper position sizing can help survive this cycle.

The same logic applies to the crypto market. Making money isn’t about luck or precise policy predictions, but about mindset and strategy. The current bloodsucking in Bitcoin and Ethereum is temporary; don’t rush to sell at a loss or blindly buy the dip. The key is to follow signals, stay steady, and deploy capital in stages—survival depends on it. As long as your principal remains, there’s always a chance. Instead of regretting past decisions, focus on risk management now and prepare for the next opportunity.