On January 7, the cryptocurrency market experienced a sharp sell-off, losing $250 billion within 24 hours. Bitcoin (BTC), the leading cryptocurrency, fell from $102,000 to $96,000. Let's explore the key reasons and consequences of this event.
Reasons for Bitcoin's Drop
Bitcoin's price decline coincided with a rise in the 10-year U.S. Treasury yield, driven by stronger December PMI data. The Institute for Supply Management reported a jump to 54.1, up from 52.1 in November, indicating unexpected growth in the U.S. services sector. This raised fears of inflation staying high, potentially delaying the Federal Reserve's expected rate cuts.
Impact on the Market
The crypto market's drop added significant pressure on traders, leading to the liquidation of $561 million worth of long positions in just a single day. The largest liquidation order came from Binance, involving $17.74 million in ETHUSDT. Other cryptocurrencies also suffered losses: Ethereum fell over 8%, Solana more than 9%, and XRP by 5%.
Future of Bitcoin
According to Glassnode analyst James Check, Bitcoin’s sell pressure is easing, but fresh demand is also slowing. Spot trading volumes have dropped by 53% since November, indicating reduced market activity. However, if the market regains momentum, reaching $100,000 remains a key target for traders. Conversely, if Bitcoin fails to hold above the $95,668 support level, the price could drop further to $93,625.
The current volatility of the crypto market calls for caution among traders and investors to adapt to rapidly changing conditions.
