The Bitcoin (BTC) price fell below $97,000 on Wednesday as economic data from the US fuelled fears over inflation. The data followed reports of solid job openings and a jump in services sector activity, adding to fears that the Federal Reserve will slow its efforts to loosen its monetary policy.
Bitcoin Falls 6% as Treasury Yields Surge
US job openings rose unexpectedly in November, showing the economy continues to be robust. On the other hand, input prices within the services sector reached a two-year high in December, a sign that activity within the services sector was quicker last month. The factors signalled an economy that made the Federal Reserve’s potential to cut interest rates anytime soon a bit harder.
The increase in economic activity sent the benchmark 10-year Treasury yield soaring to its highest rate since April 26, at 4.699 percent. All that yield surge caused a turn in investors, and many turned to safer assets such as bonds. That meant Bitcoin and other cryptocurrencies were less attractive to investors.
Bitcoin is trading 6% lower at $95,539 after briefly hitting around $101,000 on Tuesday. A sharp drop is also witnessed in Ethereum, which has dropped 9.51% to $3,327. Solana has dropped 9% to $194.02 and XRP price is down by 3% to $2.33.
The fall in Bitcoin and other cryptocurrencies caused $555 million in long positions in the derivatives market to be liquidated. Sellers were forced to buy back their positions in one leveraged flush. It was the first big liquidation event of 2023.
Market volatility also rose, as CoinGlass data shows that these long positions were liquidated. According to Ryan Lee, chief analyst at Bitget Research, such events usually cause the price to fluctuate quickly. That said, he noted that traders may scale back on leverage to prevent further liquidations, which can usher in a consolidation period.
Crypto Market Braces for Federal Reserve Decision
Market movements will continue to depend on interactions with macroeconomic data and trends in the cryptocurrency market. Over the next few weeks, investors will watch the Federal Reserve’s actions and any movements in economic indicators. Meanwhile, the market is likely to respond to a key event, such as the Federal Reserve’s interest rate decision on January 29.
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In addition, market participants will be watching Donald Trump’s inauguration on January 20 for the subsequent volatility. However, the cryptocurrency market’s future direction is far from certain in response to the shifting economic signals to which it is reacting. But for now, both market dynamics and the broader economic tendencies translate to heightened uncertainty and risk for traders.
A growing amount of caution among investors is marring the price of Bitcoin and other cryptocurrencies. Given the strength of the economic outlook, many presume that interest rates will stay up for now. Investors may continue to shift away from riskier assets like Bitcoin and Ethereum and favour more stable returns in the traditional markets.
The cryptocurrency market’s volatility will underscore how these markets are becoming tied to the broader economy. As these variables continue to fuel the market’s behaviour, investors will need to work their way through the uncertainties of inflation, interest rates, and sentiment once again.
FAQs
Why did Bitcoin fall below $97,000 on Wednesday?
Bitcoin fell below $97,000 due to concerns over inflation triggered by strong US economic data and rising Treasury yields.
What caused fears about the Federal Reserve’s monetary policy?
Solid job openings and a surge in services sector activity fueled fears that the Federal Reserve might delay easing monetary policy.
How did the US Treasury yield impact the cryptocurrency market?
The 10-year Treasury yield soared to 4.699%, leading investors to shift toward safer assets, making cryptocurrencies less attractive.
Disclaimer
The price predictions and financial analysis presented on this website are for informational purposes only and do not constitute financial, investment, or trading advice. While we strive to provide accurate and up-to-date information, the volatile nature of cryptocurrency markets means that prices can fluctuate significantly and unpredictably.
You should conduct your own research and consult with a qualified financial advisor before making any investment decisions. The Bit Journal does not guarantee the accuracy, completeness, or reliability of any information provided in the price predictions, and we will not be held liable for any losses incurred as a result of relying on this information.
Investing in cryptocurrencies carries risks, including the risk of significant losses. Always invest responsibly and within your means.
