Dogecoin (DOGE) has taken the lead in losses among major cryptocurrencies as Bitcoin (BTC) fell to nearly $96,000. This decline can be attributed to recent economic data that has resulted in rising U.S. Treasury yields.
In a notable downturn, DOGE plunged by 10%, while other cryptocurrencies such as Solana’s SOL, Cardano’s ADA, BNB Chain’s BNB, and Ether (ETH) witnessed declines of at least 7%. Bitcoin itself fell by 5.5%, contributing to a broader market slump reflected in the CoinDesk 20 (CD20), a comprehensive index that tracks the largest tokens by market cap, which fell by 7.1%.
The crypto market faced a significant liquidation event, with futures betting on higher prices resulting in an estimated $560 million in liquidations, according to reported data. This figure marks a relatively high level at the onset of the year.
The losses in the cryptocurrency sector mirrored trends seen in U.S. stock markets. The latest report from the Institute for Supply Management (ISM) regarding U.S. service providers was surprisingly robust, with its prices-paid metric reaching its highest level since early 2023.
Simultaneously, U.S. job openings exceeded expectations. These economic indicators led to a sell-off in Treasury securities across various maturities, driving the 10-year Treasury yield to its highest level since May.
A liquidation event occurs when an exchange forcibly closes a trader’s leveraged position due to margins not being met. When multiple traders are compelled to sell simultaneously, often due to long liquidations, it can trigger a domino effect where falling prices lead to additional liquidations, further exacerbating price drops.
Despite the sharp decline, market observers believe that this downturn could be a temporary setback in the broader context of the market.
Vince Yang, CEO and cofounder of zkLink, shared insights via a Telegram message, stating, “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. This shift in sentiment is something we have observed before, and it is not unusual for the crypto space.” He elaborated, “We remain optimistic. Historically, these dips often set the stage for larger bullish movements, especially given the current phase of the market cycle and the imminent presence of a more crypto-friendly administration in the United States. There are plenty of reasons to anticipate exciting developments ahead.”
Conversely, Singapore-based QCP Capital is maintaining a cautious outlook, anticipating a tumultuous period for crypto markets in January. In a Telegram broadcast, they noted, “It won’t be smooth sailing into January, as structural risks loom. The reinstatement of the U.S. Treasury debt ceiling is expected mid-month, necessitating the Treasury to implement ‘extraordinary measures’ to fund government activities.” They added, “This scenario has the potential to induce market volatility as discussions around the issue escalate.”
In conclusion, while the current decline in cryptocurrency values raises concerns, the overall sentiment remains cautiously optimistic, as many market participants believe that this may pave the way for renewed growth in the future.
