Crypto Markets Retreat as Stronger U.S. Economic Data Sparks $300M Liquidations

Crypto markets stumbled significantly in early 2025 as unexpectedly strong U.S. economic data shifted investor sentiment away from digital assets. The selloff was swift and widespread, with Bitcoin sinking below key levels while altcoins absorbed even deeper losses. This decline coincided with a major shift in Federal Reserve rate cut expectations, as market participants rapidly scaled back bets on monetary easing throughout the year.

Economic Data Catches Markets Off-Guard

The catalyst for the crypto pullback emerged from stronger-than-expected U.S. economic indicators that rattled both traditional and digital asset markets. The Bureau of Labor Statistics reported that job openings unexpectedly rose to 8.1 million in November, significantly exceeding forecasts of a decline to 7.7 million. Simultaneously, the ISM Services Purchasing Managers Index delivered another surprise, posting 54.1 for December—well above economist expectations of 53.3 and the previous month’s 52.1. Most notably, the Prices Paid subindex came in at 64.4, far exceeding the anticipated 57.5, signaling persistent inflationary pressures in the services sector.

Bond Markets Rally, Digital Assets Weaken

The strength in economic data triggered a pronounced rally in U.S. government bonds, with the 10-year Treasury yield pushing higher to 4.68%—approaching multi-year highs. This bond market movement proved particularly challenging for crypto investors, as rising yields reduce the appeal of risk-on assets like digital currencies. Bitcoin, which had traded near $101,000 through European trading hours, plummeted to $97,800 following the data release, erasing the prior day’s gains and closing down 4% over the 24-hour period. Major altcoins proved even more vulnerable to the selloff, with Ethereum and Solana declining 6%-7%, while Avalanche and Chainlink sustained sharper losses of 8%-9%.

Derivatives Markets Flush Out Overleveraged Positions

The rapid decline in crypto prices triggered substantial liquidations across derivatives markets. According to data from CoinGlass, nearly $300 million in long positions were liquidated—marking the first major leverage flush of the year. The swift unwinding of overleveraged bets highlighted how quickly sentiment can shift in crypto markets when macro conditions turn unfavorable.

Federal Reserve Rate Cut Outlook Contracts

The economic data fundamentally altered investor expectations regarding monetary policy direction. Market participants had already dismissed the possibility of a rate cut at the Federal Reserve’s January meeting, but the strong data intensified this view. By mid-week, the probability of an easing move at the March meeting had collapsed to just 37%—a dramatic reversal from the nearly 50% odds seen merely one week prior, according to CME FedWatch tracking. Looking further ahead, the odds of rate cuts in May also deteriorated significantly. Kyle Chapman at Ballinger Group noted that investors were now pricing in only one 25-basis-point rate reduction for all of 2025—a marked contraction from earlier optimism about multiple cuts.

Technical Bounce Emerges on Thin Liquidity

After the initial selloff, crypto markets stabilized with some bounce activity evident in Bitcoin and select altcoins. However, analysts urged caution about the durability of this rebound. According to LMAX Group’s Joel Kruger, the bounce appeared to be a technically driven recovery stemming from bearish positioning and thin liquidity rather than any meaningful fundamental shift. FalconX’s Joshua Lim indicated that some funds were nevertheless participating in the rally, rotating capital into volatile altcoins and options strategies.

For a more sustainable uptrend to materialize in Bitcoin, technical analysts identified key resistance levels at $72,000 and $78,000 that would need to be broken on a sustained, repeated basis. Until those hurdles are convincingly cleared, the crypto market structure remains challenged in the near term. The sharp economic data surprise underscored how closely digital assets have become tethered to macro conditions and monetary policy expectations, with crypto increasingly moving in tandem with traditional financial markets during periods of policy uncertainty.