The nascent crypto rally of early 2025 faced a notable setback on Tuesday, as bitcoin (BTC) slipped below the psychologically significant $100,000 level while major altcoins saw even sharper declines. The catalyst for the downturn? A duo of stronger-than-anticipated U.S. economic data points that poured cold water on investors’ hopes for a series of interest rate cuts this year.
Economic Data Surprises to the Upside
The morning began with a jolt, as the Bureau of Labor Statistics’ JOLTS job openings report for November unexpectedly rose to 8.1 million, easily topping economist forecasts for a decline to 7.7 million. Simultaneously, the ISM Services Purchasing Managers Index for December clocked in at a robust 54.1, overshooting expectations for 53.3 and marking a healthy uptick from November’s 52.1 reading.
While neither of these data points typically moves markets dramatically on their own, their combined effect Tuesday was to send already jittery bond yields spiking higher. The 10-year U.S. Treasury yield surged another five basis points to 4.68%, within striking distance of multi-year highs. Stocks reacted negatively as well, with the tech-heavy Nasdaq shedding over 1% and the S&P 500 declining 0.4% by late morning.
Crypto Markets Stumble
Amid the macro turmoil, bitcoin, which had been clinging to the $100,000 handle, swiftly sank to around $97,800 – relinquishing all of Monday’s gains and tumbling 4% on a 24-hour basis. The leading cryptocurrency’s pain was the altcoin market’s misery, as ethereum (ETH) and solana (SOL) cratered 6-7%, while avalanche (AVAX) and chainlink (LINK) nursed steeper 8-9% wounds.
The rapid price plunge triggered nearly $300 million in long position liquidations across crypto derivatives markets, according to data from CoinGlass – the first major leverage washout event of the year.
Rate Cut Odds Dwindle
For crypto bulls, the most concerning consequence of Tuesday’s data may be the impact on interest rate expectations. With both labor market and economic activity indicators running hotter than forecast, investors continued to scale back their projected odds for Fed rate cuts in the coming months.
As recently as last week, markets were pricing in close to a 50% probability of a rate reduction as soon as March. In the wake of this data, however, those odds have dwindled to just 37%, according to CME Group’s FedWatch tool. Looking out further, the chances of a cut by May have also dipped well south of 50%.
Scanning all of 2025, Ballinger Group’s Kyle Chapman noted investors are now only pricing in roughly one 25 basis point rate cut for the entire year.
– Kyle Chapman, Ballinger Group
Rally Loses Steam
The diminished prospects for looser monetary policy dealt a blow to crypto assets, which had sprinted out of the gates in 2025 largely on the assumption that falling inflation would permit the Fed to pivot dovish. Now, with bitcoin shedding over $3,000 in a matter of hours and the total crypto market cap dipping back below $3 trillion, the question is whether the market’s early enthusiasm was premature.
To be sure, one trading session (or even a few weeks) does not make a trend. Many pundits still expect inflation to ease convincingly as the year progresses, perhaps allowing for looser policy in the second half. But Tuesday’s action underscores that the path to more accommodative monetary conditions – and by extension, sustainably higher crypto prices – may be bumpier than the first few days of the year have suggested.
Whether crypto can quickly shake off this stumble and resume its promising 2025 start, or whether deeper near-term pain looms, may hinge on the next batch of inflation data and Fed commentary in the coming weeks. What’s clear, for now, is that strong economic prints remain a stiff headwind for digital assets – a dynamic crypto traders have grown all too accustomed to over the past 18 months. If a new era of monetary easing is indeed on the horizon, Tuesday was a reminder that the journey there will be anything but smooth.
