Just as market conditions seemed to point to a solid recovery, major cryptocurrencies once again entered a downtrend. On Tuesday, the price of Bitcoin plummeted by almost 5% from $102K to $97K per coin at the time of writing.
So far, economic data seems to be responsible for this decline, considering that stocks are also in decline. The rise in 10-year Treasury bond yields has caused panic in some sectors.
According to experts consulted by Bloomberg, this could translate into renewed fears of a recession in the US economy. « Rising yields are not necessarily a problem for stocks, unless of course the economy starts to decline. In that case, everything starts to collapse », explains Kenny Polcari of SlateStone Wealth.
As this shift in the Treasury yield curve became known, stocks and cryptocurrencies began to fall rapidly. In the latter sector, not only the major cryptocurrencies fell again, but tokens from all sectors, including memecoins. It is worth noting that if inflation increases again, this rise in bond yields could take on alarming characteristics.
Cryptocurrencies at a crucial moment
Donald Trump's inauguration in the United States will take place in about two weeks. Investors have been excited over the past few days about the prospect of an uninterrupted rally, at least until January 20. However, Tuesday's data suddenly dampened sentiment.
The recently released ISM services report was the highest since early 2023. This supports the Federal Reserve's warnings that the pace of interest rate cuts would likely slow in 2025. Simply put, the risks of inflation turning bullish again are high, or at least that's what the economic numbers suggest.
The Fed's next step to minimize this risk could be to announce rate cuts not at every FOMC meeting, but intermittently. Thus, a cut would be applied at one meeting and maintained at the next. Other data published on Tuesday also confirmed this trend. Among them, there is an increase in the number of job vacancies to a 6-month high. These vacancy data correspond to November.
Overall, these publications became a cold shower for the bullish aspirations of cryptocurrencies.