The lower-than-expected performance of the U.S. labor market data has become an important trigger for this sharp decline. The continued strength of the labor market means that wage growth pressure is difficult to alleviate, which may make the 'last mile' of inflation control even more challenging. The market had generally expected the Federal Reserve to begin a rate cut cycle in the first half of 2025, but the reality may be far more complex than anticipated. Currently, U.S. core PCE inflation remains above 3%, still a distance from the 2% target, and coupled with a resilient labor market, the Federal Reserve may have to maintain a high-interest-rate environment for a longer period.
Against this backdrop, the chain reaction triggered by the adjustment in the cryptocurrency market is particularly noteworthy. Within 24 hours, $385 million in liquidations occurred, with long positions losing $212 million, reflecting that the market may have accumulated excessive speculative positions after breaking historical highs. Any negative news could trigger a cascading decline, leading to further market turbulence.
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