Dogecoin (DOGE) led the losses among the crypto majors as Bitcoin (BTC) tumbled to nearly $96,000, likely due to new economic data that sent U.S. Treasury yields spiking.
DOGE fell 10%, Solana’s SOL, Cardano’s ADA, BNB Chain’s BNB, and Ethereum (ETH) fell at least 7%. Bitcoin fell 5.5%, and the broader CoinDesk 20 (CD20), a liquidity index that tracks the largest tokens by market capitalization, fell 7.1%.
According to the data, $560 million was liquidated in crypto futures trades that bet on rising prices, setting a relatively high level at the start of the year.
Cryptocurrency losses tracked losses in U.S. stocks. The Institute for Supply Management's (ISM) latest report on US service providers was stronger than expected, with the price paid index reaching its highest point since early 2023.
At the same time, the number of job openings in the United States increased more than expected. These developments led to a decline in U.S. Treasuries across a range of maturities, with the 10-year Treasury yield rising to its highest level since May.
Liquidation occurs when an exchange is forced to close a trader's leveraged position due to an inability to meet margin requirements. When prolonged liquidations force many traders to sell at the same time, a cycle of falling prices leads to further liquidations, which in turn causes prices to fall further.
Therefore, market participants believe Tuesday's decline is temporary in the long run.
“Markets took a hit yesterday, with Bitcoin and Ethereum falling sharply, primarily because the better-than-expected US jobs report dampened hopes for further interest rate cuts this year,” said CEO and Co-founder of zkLink. Founder Vince Yang said in a Telegram message. “This is a broad swing in sentiment that we have experienced before and is not unusual for cryptocurrencies.”
“That said, we are still optimistic. As history has shown, these sharp declines often pave the way for larger bullish moves, especially given the current state of the market cycle. Now, with a more crypto-friendly administration in place in the United States, there is good reason to believe we are heading in an exciting direction. We are several times ahead,” Yang added.
However, Singapore-based QCP Capital remains firm in its view that the cryptocurrency market is in a volatile period in January.
“It will not be smooth sailing until January due to looming structural risks,” QCP said on Wednesday's Telegram broadcast. “Reinstatement of the U.S. Treasury debt ceiling is expected to be reinstated in the middle of this month, requiring the Treasury to adopt ‘unconventional measures’ to fund government spending.”
QCP added: “This could cause market instability as the debate around this issue intensifies.”
