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The financial markets have been shaken by a wave of tension, causing a significant correction in bitcoin (BTC) and major altcoins. In just a few hours, the flagship crypto dropped below the critical threshold of $100,000, while Ethereum (ETH) collapsed below $3,400. This pullback is set against a backdrop of deteriorating global economic conditions. Several factors explain this storm in the crypto market. On one hand, the rise in U.S. bond yields. On the other hand, the monetary policy of the U.S. Federal Reserve (Fed) continues to weigh heavily on market confidence. At the same time, the global economic environment remains marked by additional stress factors. In the face of these disruptions, the crypto market is experiencing a period of high volatility, where investor caution mixes with panic movements. This correction now raises the question of a potential short-term rebound or an extension of the downtrend due to an uncertain macroeconomic environment.
The Threat of Interest Rates
The recent drop in cryptos is part of a context of widespread retreat of risky assets, largely influenced by the evolution of U.S. bond rates. For several days, state bond yields have been steadily increasing, making these investments more attractive than volatile markets like crypto. The yield on 10-year bonds reached 4.70 %, while the rates for 5 and 30 years climbed to 4.50 % and 4.61 %, respectively. This phenomenon encourages a shift of capital towards investments perceived as safer, to the detriment of more speculative assets like bitcoin and tech stocks.
At the same time, decisions made by the U.S. Federal Reserve (Fed) amplify the pressure on the market. The minutes from the last meeting revealed that the interest rate cuts initially expected for 2025 might be fewer than anticipated. This revision dampens investor enthusiasm and weighs on the liquidity of the crypto market, which generally thrives in a more conducive monetary environment.
Additionally, the unexpected resilience of the U.S. job market further complicates the situation. Indeed, with 8.1 million job openings in November, the strength of the labor market suggests persistent inflationary pressure, which further reduces the likelihood of a rapid easing of monetary policy. The Fed, keen on containing inflation, might therefore maintain high rates for an extended period, a scenario historically unfavorable to cryptos.
Thus, all these factors create an unfavorable environment for risky assets, where investor caution outweighs speculation. In the face of this combination of economic and monetary pressures, the crypto market is undergoing a phase of heightened uncertainty, marked by an intensification of selling and a significant increase in volatility.
A Market Under High Tension : Economic Uncertainties and Volatility
Beyond the decisions of the Federal Reserve, other macroeconomic factors contribute to a climate of widespread distrust. Budget management under the Trump administration is raising growing concerns. Additionally, the increase in public deficits and the lack of a clear strategy from the U.S. Treasury accentuate fears of an unstable financial environment. Uncertainty related to fiscal policy and public spending financing pushes some investors to adopt a more cautious stance, avoiding risky assets like cryptos.
In this context, Arthur Hayes, former CEO of BitMEX, believes that two major events could exacerbate crypto volatility in the coming months. According to him, the replenishment of the Treasury General Account (TGA) and the April tax season risk reducing dollar liquidity in the markets, which would place additional pressure on cryptos. However, if the U.S. Treasury needs to replenish its reserves, this could lead to a temporary drying up of capital flows, a phenomenon that has often coincided with declines in bitcoin and other cryptos in the past.
The repercussions of these economic tensions have resulted in a dramatic drop in prices. In just a few hours, bitcoin (BTC) lost 5.0 4 %, falling to $96,556, while its trading volume surged by 13 %, reaching $55.12 billion. This intense activity reflects a market in turmoil, where investors respond swiftly to economic signals.
Ethereum (ETH) was not spared. Its price fell by 8%, dropping to $3,370, while its trading volume increased by 21 %, indicating heightened volatility. Meanwhile, Dogecoin (DOGE) recorded a loss of 9.12 %, illustrating the extent of the pullback affecting the entire crypto market.
In the face of this instability, investors are adopting opposing strategies. Some, gripped by panic, liquidate their positions to limit their losses, while others view this drop as an opportunity to accumulate assets at reduced prices. Such opposition between capitulation sales and strategic purchases further intensifies market volatility.
This correction highlights how sensitive the crypto market remains to monetary decisions and macroeconomic tensions. While some observers believe that the first quarter of 2025 might see a temporary recovery due to an increase in liquidity, others warn that budgetary uncertainties and the Fed’s tightening could prolong this downward phase. For investors, the challenge now lies in their ability to adapt to an environment where every economic announcement can trigger a trend reversal.
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Diplômé de Sciences Po Toulouse et titulaire d’une certification consultant blockchain délivrée par Alyra, j’ai rejoint l’aventure Cointribune en 2019.
Convaincu du potentiel de la blockchain pour transformer de nombreux secteurs de l’économie, j’ai pris l’engagement de sensibiliser et d’informer le grand public sur cet écosystème en constante évolution. Mon objectif est de permettre à chacun de mieux comprendre la blockchain et de saisir les opportunités qu’elle offre. Je m’efforce chaque jour de fournir une analyse objective de l’actualité, de décrypter les tendances du marché, de relayer les dernières innovations technologiques et de mettre en perspective les enjeux économiques et sociétaux de cette révolution en marche.
DISCLAIMER
The views, thoughts, and opinions expressed in this article belong solely to the author, and should not be taken as investment advice. Do your own research before taking any investment decisions.
