Crypto Markets Crack Under Pressure as Stronger U.S. Economic Data Derails 2025 Rate Cut Hopes

Crypto markets took a sharp hit at the start of 2025, with digital assets sliding across the board as unexpectedly robust U.S. economic data forced investors to recalibrate their expectations for Federal Reserve interest rate cuts. The selloff revealed just how sensitive crypto remains to macroeconomic shifts, particularly when those shifts threaten the lower-rate environment that has fueled much of the rally in digital assets since late 2024.

Economic Data Shock Sends Bitcoin Below $98K and Crypto Assets Tumbling

Bitcoin slipped below the psychologically critical $98,000 level on the morning of January 14 following two stronger-than-expected U.S. economic reports. The Bureau of Labor Statistics reported that job openings for November unexpectedly climbed to 8.1 million from 7.8 million the prior month, decisively beating analyst forecasts for a pullback to 7.7 million. Arriving simultaneously, the ISM Services Purchasing Managers Index for December posted 54.1—well above the 53.3 consensus and markedly higher than November’s 52.1 reading. The Prices Paid subindex, a crucial inflation gauge, printed at 64.4 versus expectations of 57.5 and prior month’s 58.2.

The twin data surprises reverberated through crypto markets with immediate force. BTC, which had traded near $101,000 during European afternoon hours, plummeted toward $97,800 in response to the reports. This erased the prior day’s gains and marked a 4% pullback over 24 hours. But bitcoin was not alone in its struggles—the broader crypto ecosystem sustained even deeper wounds.

Altcoins Suffer Steeper Losses Than Bitcoin in Crypto Selloff

Major altcoins absorbed punishment beyond what bitcoin endured. Ethereum’s ether (ETH) tumbled 6-7%, while Solana (SOL) declined by comparable magnitude. The pain intensified for smaller-cap projects: Avalanche (AVAX) cratered 8-9% and Chainlink (LINK) suffered similar pressure. These outsized losses relative to bitcoin reflected the elevated risk appetite required to hold more volatile crypto assets in a risk-off environment.

$300M in Crypto Liquidations Flash Danger Signs in Derivatives

The sharp price action triggered a cascade of forced liquidations across cryptocurrency derivatives markets. Long positions betting on rising prices faced sudden margin calls as collateral values evaporated. According to CoinGlass data, nearly $300 million in crypto long liquidations were flushed from the system—the first major leverage wipeout of the year. This suggested that financial leverage had been building in the crypto ecosystem despite warnings from macro analysts about deteriorating conditions.

Federal Reserve Rate Cut Bets Evaporate on Strong Jobs and Services Data

The economic data served as a devastating blow to hopes for aggressive monetary easing in 2025. Market participants had already abandoned expectations for a rate cut at the Federal Reserve’s January policy decision. However, the new data proved even more disruptive—odds of an easing move at the March meeting collapsed to just 37% from approximately 50% only a week prior, according to CME FedWatch analysis. Probability of a May cut also deteriorated significantly below the 50% threshold.

Zooming out to the full calendar year, investors had dramatically compressed their rate cut expectations. Ballinger Group analyst Kyle Chapman noted that market pricing now reflects only roughly one 25 basis point rate reduction for all of 2025. This represented a seismic shift from earlier optimism about a multi-cut environment that had underpinned much of crypto’s early-year momentum.

The repricing reflected how swiftly crypto sentiment can reverse when macroeconomic conditions diverge from bullish assumptions. U.S. Treasury yields climbed sharply, with the 10-year yield advancing five basis points to 4.68% and approaching multi-year highs. This hit to fixed income valuations rippled through risk assets broadly, with the Nasdaq declining over 1% and the S&P 500 slipping 0.4% in late-morning trading.

Market Recovery Attempts Signal Mixed Technical Conditions

Later in the session, bitcoin attempted to recover some losses, briefly rallying back toward higher levels as traders pursued short-covering. This technical bounce triggered ripple effects across crypto, lifting altcoins and crypto-linked equities including Coinbase and other digital asset-focused companies. However, analysts urged caution about the sustainability of the rebound. LMAX Group strategist Joel Kruger characterized the move as primarily a technical squeeze driven by extreme bearish positioning and thin liquidity rather than a fundamental shift in market conditions.

Derivatives traders and hedge funds began rotating capital toward more volatile crypto assets and options strategies in an attempt to capitalize on the price action. FalconX’s Joshua Lim observed that some funds were actively chasing the rally despite the absence of clear bullish catalysts. Key technical resistance for bitcoin around $72,000 and $78,000 levels would need to hold on a sustained basis to confirm a structural shift in the uptrend, traders noted.

The episode underscored a persistent vulnerability in crypto markets: their acute sensitivity to shifts in broader financial conditions, particularly those affecting real interest rates and risk appetite. Until the Federal Reserve signals a more accommodative path or economic data moderates, crypto may struggle to recapture the momentum that characterized late 2024.