Dogecoin (DOGE) led losses among crypto majors as bitcoin (BTC) slipped to near $96,000, a decline attributed to new economic data that sent U.S. Treasury yields soaring.
DOGE plunged 10%, with Solana’s SOL, Cardano’s ADA, BNB Chain’s BNB, and Ether (ETH) down at least 7%. Bitcoin fell 5.5%, as the market broadened CoinDesk20 (CD20)a liquid index that tracks the largest tokens by market capitalization, fell 7.1%.
Crypto futures betting on higher prices led to a $560 million liquidation, the data showssetting a relatively high level at the start of the year.
Losses in crypto followed those of US stocks. The Institute for Supply Management’s (ISM) latest report on U.S. service providers proved stronger than expected, with the price-paid metric hitting its highest level since early 2023.
At the same time, job openings in the United States increased more than expected. These developments led to declines in Treasury securities across various maturities, pushing the 10-year Treasury yield to its highest level since May.
A liquidation occurs when an exchange forcibly closes a trader’s leveraged position due to their inability to meet margin requirements. When many traders are forced to sell at the same time due to long liquidations, it creates a cycle in which falling prices lead to more liquidations, which in turn causes prices to fall even further.
As such, market observers view Tuesday’s drop as a long-term failure.
“Markets took a hit yesterday, with Bitcoin and Ethereum falling sharply, mainly because stronger-than-expected US jobs data dampened hopes for further rate cuts this year,” shared Vince Yang, CEO and co-founder of zkLink in a Telegram message. “This is the kind of broader sentiment shift we’ve seen before, which is not unusual for crypto.”
“That said, we remain optimistic. History shows that these dips often pave the way for larger bullish moves, especially given the current state of the market cycle, and with the arrival of a more crypto-friendly US administration, there is every reason to believe that we are heading towards exciting events. times in advance,” Yang added.
Singapore-based QCP Capital, however, stands by its views on a tough time for crypto markets in January.
“The month of January will not go smoothly, as structural risks loom,” QCP said in a telegram broadcast on Wednesday. “The reinstatement of the US Treasury debt ceiling is expected to be reinstated mid-month, requiring the Treasury to adopt “extraordinary measures” to finance government spending.”
“This could trigger volatility in the market as discussions around the issue intensify,” QCP added.