Drastic Decline in Cryptocurrencies Following Economic Data
On January 7, the crypto market experienced a significant sell-off following the release of new economic data. Bitcoin's price, which had surpassed $100,000 the day before, saw a sharp decline. This drop impacted other major cryptocurrencies, resulting in liquidations exceeding $150 million.

Bitcoin's price dropped over 4% in the last 24 hours, currently trading around $97,000. Ethereum fell by 8%, Solana lost more than 7%, and XRP decreased by approximately 5%. Other notable declines included Avalanche (AVAX), Dogecoin (DOGE), and Chainlink (LINK), each losing over 9%.

Massive Liquidations Triggered by Market Correction
The market correction led to significant liquidations. According to CoinGlass data, liquidations over the past 24 hours reached $388 million, with $230 million liquidated in the last four hours alone. Long positions accounted for most of the losses, totaling $212 million.

Although these liquidations are substantial, they are lower than the largest 24-hour liquidation recorded last month, which amounted to $856.7 million. Over 129,900 cryptocurrency traders were liquidated in the past 24 hours. The largest single liquidation was an ETHUSDT position on Binance worth over $11.9 million.

Crypto-related stocks were also affected, with MicroStrategy and Coinbase dropping over 9% and 8%, respectively, while bitcoin miners Core Scientific and MARA Holdings fell by more than 6% and 7%.

U.S. Economic Data Triggers Market Decline
“The main reason for the market drop: Strong U.S. data caused a spike in bond yields. The ISM index exceeded expectations, and JOLTS job openings increased. The risk asset market is currently in a phase where ‘good data is bad data,’” explained crypto analyst Miles Deutscher.

New data from the U.S. Bureau of Labor Statistics revealed 8.1 million job openings at the end of November, the highest level since May 2023. The hiring rate dropped to 3.3%, while the quit rate fell to 1.9%.

Impact on Inflation and Central Bank Policies
The cryptocurrency price drop also coincided with a rise in the 10-year U.S. Treasury yield, which climbed six basis points to 4.69%. Data showed unexpected growth in the services sector, fueling concerns about persistent inflation.

Analysts at Bank of Corp. warned that strong economic data might lead the Federal Reserve (Fed) to maintain elevated interest rates for a longer period. This could negatively impact risk assets like Bitcoin.

Long-Term Effects on the Crypto Market
The central bank has indicated that, despite the third rate cut, it may reduce rates less than investors expect in 2025. Historically, rate cuts have positively influenced Bitcoin, while rate hikes have had a negative impact.

Thomas Tzitzouris of Strategas noted that this situation spells trouble for both risk assets and safe havens. Businesses are now facing the tightest risk-adjusted levels of the cycle, placing cryptocurrencies in a so-called "danger zone."

The crypto market continues to face challenges, and its future trajectory will depend on global economic trends and monetary policies.

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