Dogecoin (DOGE) led the crypto losses on Tuesday, falling by 10%, as bitcoin (BTC) dipped to nearly $96,000, largely driven by new economic data that sent U.S. treasury yields soaring. Alongside DOGE, major cryptocurrencies like Solana (SOL), Cardano (ADA), BNB Chain’s BNB, and ether (ETH) each saw declines of at least 7%, while bitcoin itself dropped by 5.5%. The CoinDesk 20 (CD20), a broad index of the largest cryptocurrencies by market cap, lost 7.1%.
Crypto futures tied to higher prices experienced a significant liquidation, with data showing $560 million worth of positions being closed, marking a substantial figure early in the year. These losses in the crypto market mirrored declines in U.S. stocks, driven by a stronger-than-expected report from the Institute for Supply Management (ISM), which tracks U.S. service sector activity. The report showed a surge in the “prices-paid” component, reaching its highest level since early 2023.
In addition, U.S. job openings unexpectedly rose, further intensifying concerns. This led to a sell-off in Treasury securities across various maturities, pushing the 10-year Treasury yield to its highest point since May.
Liquidations occur when traders who have leveraged their positions cannot meet the margin requirements, causing exchanges to close their positions forcefully. This often triggers a cycle where falling prices lead to more forced liquidations, causing even steeper price drops.
Despite these setbacks, some market analysts view the downturn as temporary. Vince Yang, CEO of zkLink, commented on the situation in a Telegram message, saying, “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. With a more crypto-friendly administration in the U.S. coming in, there’s every reason to believe we’re heading for some exciting times ahead.”
However, QCP Capital, a Singapore-based firm, cautioned that January could still be a volatile month for crypto markets. They warned that structural risks are looming, particularly the reinstatement of the U.S. Treasury debt ceiling, expected in mid-January. This will require the Treasury to implement “extraordinary measures” to fund government expenditures, which could trigger market volatility as discussions intensify around the issue.
