Bitcoin’s recent price rally met a sharp reversal as the cryptocurrency fell almost 5% yesterday, coinciding with significant market turbulence across equities and risk assets.
The correction was triggered by fresh U.S. economic data, which dampened expectations for imminent Federal Reserve rate cuts. Stocks, including crypto-related equities like MicroStrategy and Coinbase, also saw steep declines, reflecting the broader risk-off sentiment.
Bitcoin’s Retreat Amid Economic Indicators
The U.S. Bureau of Labor Statistics released data showing a rise in job openings to 8.1 million in November, up from 7.8 million in October and surpassing the 7.7 million forecast, Associated Press reported.
This increase, coupled with the Institute for Supply Management’s (ISM) services index showing acceleration in December activity and rising prices, signaled persistent economic strength and inflationary pressures. Treasury yields climbed in response, with the 10-year yield hitting a high of 4.699%, its highest level since April. Rising yields typically weigh on speculative assets like Bitcoin, which dropped to around $96,200, down 5% in 24 hours.
The broader crypto market reflected this bearish sentiment. Ethereum fell 8.4% to $3,371, and Solana tumbled 8.23% to $199. Total crypto market capitalization declined nearly 6% to $3.37 trillion, per CoinMarketCap data.
Impact on Crypto-Linked Equities
MicroStrategy, a company heavily tied to Bitcoin due to its substantial holdings, saw its stock price drop 11% during Tuesday trading. The decline comes just a day after the company disclosed a $101 million Bitcoin purchase, bringing its total holdings to 447,470 BTC. The company’s aggressive Bitcoin buying strategy has made its stock a proxy for Bitcoin’s performance, amplifying the impact of price fluctuations.
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Coinbase stock also experienced significant losses, falling 8.14% to $264.33. As a leading cryptocurrency exchange, Coinbase’s fortunes are closely tied to crypto market dynamics.
The broader equity market followed suit, with the Nasdaq Composite down 1.9%, the S&P 500 shedding 1.1%, and the Dow Jones Industrial Average losing 0.4%. Tech heavyweights like Nvidia and Tesla saw notable declines of 6% and 4%, respectively, amplifying the risk-averse sentiment.
Rate Cut Expectations in Question
Market optimism for Federal Reserve rate cuts in early 2025 has waned as the latest data paints a picture of persistent inflation and a robust labor market.
According to the CME Group’s FedWatch tool, the probability of no rate cuts at the upcoming Federal Reserve meeting later this month stands at 95%. Minutes from the Fed’s December meeting, set to be released today, are expected to provide further insight into policymakers’ outlook on inflation and rate policy.
Macro Headwinds for Crypto?
While the macroeconomic backdrop continues to present challenges for cryptocurrencies, the long-term outlook remains a topic of debate among analysts, particularly as corporate Bitcoin adoption persists.
The coming days will bring additional economic data, including ADP’s private payrolls report and the December jobs report from the Bureau of Labor Statistics, which could further influence market sentiment and shape expectations for Federal Reserve policy.
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