Crypto Market Suffers as Economic Data Increases Inflation Concerns

Crypto Market – Bitcoin, Ethereum, and Solana Fall Amid Rising Economic Concerns

Crypto Market – On January 7, 2025, both the crypto and traditional markets experienced significant declines, primarily driven by stronger-than-expected economic indicators. These reports have raised concerns that anticipated Federal Reserve rate cuts could be delayed, putting downward pressure on asset prices across the board.

Bitcoin Drops Over 5% Amid Market Sell-Off

Bitcoin saw a sharp decline, dropping to $96,909, representing a fall of more than 5% in the last 24 hours. The crypto market correction was severe, with over $483.44 million in long positions liquidated during the 24-hour period, according to Coinglass data. This sharp price correction is not isolated to Bitcoin alone—other major cryptocurrencies followed the trend, with Ethereum falling by more than 8%, and Solana losing over 7% of its value. The broader crypto market faced significant headwinds as traders adjusted their expectations in response to the latest economic data.

Economic Data Fuels Investor Caution

The catalyst for the market’s downturn stemmed from two key economic reports released on January 7, 2025. The Institute for Supply Management’s (ISM) December PMI jumped to 54.1, surpassing the prior month’s reading of 52.1. This increase suggests that the U.S. manufacturing sector is continuing to expand, putting pressure on the Federal Reserve to address persistent inflationary pressures.

Additionally, the Job Openings and Labor Turnover Survey (JOLTS) report for November showed higher-than-expected job openings, indicating that the labor market remains tight. However, there was a noticeable slowdown in hiring compared to the previous month, and the quit rate, an important indicator of worker confidence, fell from 2.1% in October to 1.9% in November.

Recalibration of Rate-Cut Expectations

The economic data has led traders to reassess the likelihood of rate cuts by the Federal Reserve in the near future. Based on these new data points, market participants are now assigning a less than 50% chance of a rate cut before June 2025, with expectations now shifting towards the Fed maintaining its current interest rates during the upcoming January meeting.

Stock Market Reaction: S&P 500 and Nasdaq Decline

The stock market mirrored the cautious sentiment in the broader economy. The S&P 500 index dropped by 1.1%, while the Nasdaq Composite saw a more significant loss of 1.9%. Nvidia shares were particularly hard-hit, falling by 6.2% despite the company’s announcement of new artificial intelligence (AI) initiatives at the CES 2025 conference. CEO Jensen Huang unveiled plans for groundbreaking AI products, but investor sentiment remained bearish, contributing to the company’s significant stock decline.

Disclaimer: This article is for informational purposes only and does not constitute investment advice. Cryptocurrencies and stocks, particularly in micro-cap companies, are subject to significant volatility and risk. Please conduct thorough research before making any investment decisions.