Dogecoin (DOGE) took a significant hit, dropping 10% as Bitcoin (BTC) fell to nearly $96,000. This downturn can be linked to fresh economic reports that sent U.S. Treasury yields climbing, significantly impacting the broader crypto market.
Alongside Dogecoin, other notable cryptocurrencies such as Solana’s SOL, Cardano’s ADA, BNB Chain’s BNB, and Ether (ETH) all saw declines of at least 7%. Meanwhile, Bitcoin experienced a 5.5% dip, and the CoinDesk 20 (CD20) index, which tracks the largest tokens by market cap, fell by 7.1%.
The situation worsened for traders holding onto long positions, with a staggering $560 million in futures contracts liquidated. This is a notable trend, especially since it sets a concerning precedent at the start of the year.
These losses came at a time when U.S. stocks were also struggling. The latest report from the Institute for Supply Management (ISM) revealed that U.S. service providers were performing better than expected, pushing the prices-paid measure to its highest point since early 2023. Additionally, U.S. job openings exceeded forecasts, which negatively affected Treasury securities across different maturities, causing the 10-year Treasury yield to reach levels not seen since May.
Liquidation happens when an exchange forcibly closes a trader’s leveraged position due to failing to meet margin requirements. A cascading effect often ensues; when numerous traders are boxed in and forced to sell, it leads to falling prices, which can lead to more liquidations.
Market analysts suggest that Tuesday’s downturn is merely a temporary setback. Vince Yang, CEO and cofounder of zkLink, commented, “Markets took a hit yesterday, with Bitcoin and Ethereum dropping hard, mostly because stronger-than-expected U.S. job data dimmed hopes for more rate cuts this year. It’s the kind of broader sentiment shift we’ve seen before, nothing unusual for crypto.”
Yang remained optimistic, stating, “History shows these dips often pave the way for bigger bullish movements, especially with where we are in the market cycle now, and with a more crypto-friendly administration in the US coming in, there’s every reason to believe we’re heading for exciting times ahead.”
Conversely, QCP Capital from Singapore takes a more cautious stance, warning of potential turbulence in the crypto markets as we approach January. “It won’t be smooth sailing into January, as structural risks loom,” they noted in a Telegram broadcast. They highlighted that the U.S. Treasury debt ceiling will likely be reinstated mid-month, prompting the need for the Treasury to implement “extraordinary measures” to continue funding government operations.
“This could trigger market volatility as discussions around the issue intensify,” they added, echoing a sentiment of caution as participants brace for the upcoming financial landscape. In an environment where volatility reigns, staying informed and prepared is essential for both seasoned investors and newcomers alike.
