The cryptocurrency market faced a sharp reversal early in the week as Bitcoin (BTC) dropped below $98,000, erasing earlier gains amid stronger-than-expected U.S. economic data. The disappointing macroeconomic outlook for near-term Federal Reserve rate cuts spooked investors, triggering a wave of long liquidations exceeding $300 million across crypto derivatives markets.
This sudden downturn marked the first major leverage wipeout of 2025 and highlighted how sensitive digital assets remain to shifts in monetary policy expectations.
Unexpected Economic Strength Weighs on Crypto
On Tuesday morning in the U.S., two key economic reports rattled financial markets and reversed the bullish momentum that had carried Bitcoin close to $101,000 during European trading hours.
The U.S. Bureau of Labor Statistics released its Job Openings and Labor Turnover Survey (JOLTS) for November, showing job openings unexpectedly rose to 8.1 million—up from 7.8 million the previous month and well above the 7.7 million analysts had forecast. A hotter labor market suggests continued economic strength, reducing pressure on the Fed to ease monetary policy.
Simultaneously, the Institute for Supply Management (ISM) reported its Services PMI for December at 54.1, surpassing both the expected 53.3 and November’s reading of 52.1. This indicates robust expansion in the services sector, which makes up a significant portion of the U.S. economy. Even more inflationary was the "Prices Paid" subindex, which surged to 64.4—far exceeding the 57.5 forecast and prior month’s 58.2—signaling rising input costs and potential inflationary pressures.
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Market Reaction: Rates Up, Stocks Down, Crypto Follows
While neither JOLTS nor ISM Services are typically headline-grabbing indicators, their combined impact amplified existing jitters in bond markets. The yield on the 10-year U.S. Treasury note climbed another five basis points to 4.68%, approaching multi-year highs.
Higher yields increase the opportunity cost of holding non-yielding assets like Bitcoin, making them less attractive to risk-off investors.
Equity markets also reacted negatively, with the Nasdaq Composite dropping over 1% and the S&P 500 falling 0.4% by late morning. As tech stocks declined, so too did risk appetite in crypto.
Bitcoin, which had held steady just under $101,000 overnight, plunged to $97,800 following the data releases—a 4% drop within 24 hours. The correction wiped out all gains from the previous day and signaled weakening bullish conviction.
Altcoins Hit Harder Than BTC
As often happens during market pullbacks, altcoins experienced steeper declines than Bitcoin.
Ethereum’s ether (ETH) fell by approximately 6%, while Solana’s SOL dropped around 7%. More speculative assets saw even greater volatility: Avalanche’s AVAX and Chainlink’s LINK both tumbled between 8% and 9%, reflecting increased risk aversion among traders.
These moves underscored a broader trend: when macroeconomic headwinds intensify, capital tends to retreat from higher-beta digital assets back into safer positions—often USD or stablecoins.
$300 Million in Long Positions Liquidated
According to data from CoinGlass, the rapid price decline triggered nearly $300 million in long liquidations across crypto futures and perpetual swap markets—the largest single-day flush of leveraged longs so far in 2025.
This level of forced selling typically occurs when traders who borrowed funds to amplify their exposure are unable to meet margin requirements as prices move against them. The event serves as a reminder of the dangers of excessive leverage in volatile markets.
While such corrections can be painful in the short term, many analysts view periodic deleveraging as healthy for market structure, helping clear overextended positions and reduce systemic risk.
Why This Matters for Investors
The sequence of events highlights how deeply intertwined crypto markets have become with traditional financial indicators. No longer isolated speculative assets, major cryptocurrencies like BTC and ETH now react swiftly to changes in interest rate expectations, inflation signals, and labor market dynamics.
For investors, this means staying informed about macroeconomic calendars and central bank sentiment is no longer optional—it's essential.
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Fed Rate Cut Expectations Fade
One of the most significant consequences of the latest data has been a sharp recalibration of expectations for Federal Reserve monetary policy.
Just a week ago, futures markets priced in nearly a 50% chance of a rate cut at the March Federal Open Market Committee (FOMC) meeting. That probability has now fallen to just 37%, according to the CME FedWatch Tool.
Expectations for a May rate cut have also dipped below 50%, and looking across the full year, some analysts believe only one 25-basis-point rate reduction is likely in 2025—if any.
Kyle Chapman, macro strategist at Ballinger Group, noted that markets are now pricing in minimal easing: “Investors are walking back their optimism fast. With growth strong and inflation sticky, the Fed has no urgency to cut.”
This hawkish repricing has contributed directly to tighter financial conditions—and downward pressure on risk assets like cryptocurrency.
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Frequently Asked Questions (FAQ)
Q: Why did Bitcoin drop below $98,000?
A: Bitcoin fell due to stronger-than-expected U.S. economic data, including rising job openings and an expanding services sector, which reduced expectations for near-term Federal Reserve rate cuts.
Q: How much in crypto positions were liquidated?
A: Nearly $300 million in long positions were liquidated across crypto derivatives markets following the price drop—the largest leverage flush of 2025 so far.
Q: What is the ISM Services PMI and why does it matter for crypto?
A: The ISM Services PMI measures economic activity in the U.S. services sector. A reading above 50 indicates expansion. Strong readings suggest economic resilience, which may delay Fed rate cuts—negatively impacting risk assets like crypto.
Q: Are more rate cuts expected in 2025?
A: Market expectations have significantly decreased. As of now, there's only a 37% chance of a rate cut in March 2025, and odds for May are below 50%. Traders now anticipate only one potential 25-basis-point cut this year.
Q: How do Treasury yields affect Bitcoin prices?
A: Rising Treasury yields increase the attractiveness of safer assets like bonds, making non-yielding assets such as Bitcoin relatively less appealing to investors.
Q: Which altcoins dropped the most after the news?
A: Ethereum (ETH) fell ~6%, Solana (SOL) ~7%, while Avalanche (AVAX) and Chainlink (LINK) dropped between 8% and 9%.
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Final Thoughts
The early January rally in crypto has hit its first major speed bump—not from internal network issues or regulatory concerns, but from macroeconomic fundamentals. As long as interest rate policy remains uncertain, Bitcoin and other digital assets will continue to experience volatility tied to economic data releases.
Traders should prepare for more such swings throughout 2025, especially as inflation trends and labor market health remain key focal points for the Federal Reserve.
Staying informed, managing leverage carefully, and understanding how traditional markets influence crypto will be critical skills for navigating this evolving landscape.