Bitcoin Breaks Below $97K with $555M Liquidated as US Economic Indicators Strengthen

Bitcoin dropped below $97,000 on Wednesday, losing its grip on the $100,000 level. The decline followed a series of positive US economic reports Tuesday, which raised fears that a potential inflation rebound could delay the Federal Reserve’s plans to ease monetary policy.

U.S. stocks gave up early gains after the Labor Department reported an unexpected increase in job openings for November. Additionally, a separate report showed that services sector activity accelerated in December, with input prices hitting their highest level in almost two years.

The data pointed to a strong economy, pushing benchmark 10-year Treasury yields up to 4.699%. This marked their highest level since April 26.

Cryptocurrencies saw a sharp correction due to plummeting U.S. stocks such as Nvidia and Tesla, with Bitcoin dropping below $100,000 again, and Altcoins dropping even more violently, as market sentiment turned pessimistic.
In terms of options data, short-term IVs rebounded… pic.twitter.com/FJZWgI3Mdn

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Crypto Market Drops 7.2% Amid Uncertainty Over Fed Easing Triggered by Strong US Data

Bitcoin last traded 5% lower at $96,602, after reaching an earlier high of around $101,000. Meanwhile, Ethereum tumbled 8.4% to $3,373, XRP slipped nearly 3% to $2.33 and Solana dropped 8% to $199.36. As a result, the total cryptocurrency market cap fell 7.2% to $3.5 trillion by 11:05 pm on Tuesday.

Rising job openings and increased services sector activity usually signal a strong economy. In response, investors tend to expect the Fed to maintain or even raise interest rates, rather than cut them.

Rising interest rates usually hurt riskier assets like Bitcoin by raising borrowing costs and shifting investor focus to safer options, such as higher-yielding bonds. The jump in 10-year Treasury yields reflects this shift, making cryptocurrencies less attractive compared to traditional investments.

$555M in Long Positions Wiped Out Amid Market Drop

According to CoinGlass, the rapid drop in prices led to the liquidation of almost $555m in long positions in the derivatives markets, which were betting on price increases. This event marked the first significant leverage flush of the year.

“In the short term, this significant liquidation event has heightened market volatility, as rapid price adjustments often follow forced sales,” said Ryan Lee, chief analyst at Bitget Research. “Traders may reduce leverage to avoid additional liquidations, potentially leading to a phase of consolidation or further price declines, contingent on prevailing market sentiment.”

“The interplay between macroeconomic indicators and crypto market dynamics will remain a critical factor influencing investor behavior and overall market performance in the coming weeks,” he added.

Looking ahead, key events likely to influence the market include Donald Trump’s inauguration on Jan. 20 and the Federal Reserve’s interest rate decision on Jan. 29.