Significant decline in traditional and cryptocurrency markets
On January 7, 2025, both traditional and cryptocurrency markets fell sharply.
Bitcoin falls below $97,000
largest Bitcoinplummeted to $96,909, down more than 5% in the past 24 hours. Due to this sudden drop, there was a clear liquidation in the cryptocurrency market. Coinglass claimed to have sold approximately $483.44 million in long positions in one day. The sell-off didn’t just affect Bitcoin; Ethereum fell by more than 8%, and Solana fell by more than 7%. These losses show how sensitive the cryptocurrency market is to macroeconomic events and investor sentiment.
Source: CoinGecko
Two important economic assessments triggered market reactions. The Institute for Supply Management’s Purchasing Managers’ Index (PMI) rose to 54.1 in December, up from 52.1 in November. The rise suggests economic activity is beating expectations, which could reduce the need for the Federal Reserve to cut interest rates.
Additionally, the November Job Opportunities and Labor Turnover Survey (JOLTS) also showed more job openings than expected. Meanwhile, hiring is down compared to last month, consistent with a mixed job market. The turnover rate fell to 1.9% in November from 2.1% in October, indicating that workers are confident about their employment prospects. These numbers suggest that while the job market remains tight, the dynamics appear to be changing.
Better economic statistics have led investors to change their views on Fed policy. Today, traders see less than a 50% chance of a rate cut by June. This is a big change as many expect monetary policy to ease sooner. Investors are on the sidelines as the Fed is likely to keep interest rates unchanged at its next meeting in January.
stock market correction
Traditional stock markets are also seeing the impact of these changes. The Nasdaq fell 1.9%; the S&P 500 fell 1.1%. High-growth IT companies have been particularly hard hit. Nvidia shares fell 6.2%. The decline occurred despite CEO Jensen Huang revealing new artificial intelligence projects at the Consumer Electronics Show (CES). A growing number of investors are concerned that long-term high interest rates could impact company profitability, while economic growth could lead to a broader market downturn.
The market volatility on January 7 highlighted the close relationship between the Fed’s operations and economic statistics. Cryptocurrency markets are often viewed as distinct from traditional markets, but with comparable sensitivity to macroeconomic indicators. Investors in both areas may have to prepare for continued volatility as monetary policy and economic conditions change.
As a rate cut by the Federal Reserve in the near future appears less likely, both cryptocurrencies and traditional markets are likely to come under further pressure. The main driver is likely to remain economic data, with investors likely to keep changing plans based on changing conditions.
