How Strong U.S. Economic Data Sparked a Crypto News Storm, Triggering $300M in Liquidations

Cryptocurrency markets faced a significant shock when robust economic data from the United States sent ripples through digital asset valuations. The event exemplified how traditional macroeconomic indicators can rapidly reshape investor sentiment in the crypto space, leading to substantial forced position closures and revised expectations for monetary policy ahead.

The Economic Catalyst: Stronger-Than-Expected U.S. Labor and Services Data

The volatility centered on two economic announcements released simultaneously on a Tuesday morning. The Bureau of Labor Statistics reported that job openings in November climbed unexpectedly to 8.1 million, surpassing the previous month’s 7.8 million and defying analyst expectations for a decline to 7.7 million. This surprised the markets with a stronger-than-anticipated labor market reading.

Compounding the upside surprise, the ISM Services Purchasing Managers Index for December came in at 54.1, exceeding forecasts of 53.3 and marking a notable acceleration from November’s 52.1. Most striking was the Prices Paid subindex, which registered at 64.4—substantially hotter than the consensus estimate of 57.5 and well above the previous month’s reading of 58.2. While individual economic releases don’t always provoke major market movements, the combined effect of unexpectedly resilient labor demand and elevated service-sector pricing pressures created turbulence across multiple asset classes.

Market Domino Effect: From Bond Yields to Bitcoin and Altcoin Valuations

The economic data immediately reverberated through fixed-income markets, sending the 10-year U.S. Treasury yield up another five basis points to 4.68%, bringing it within striking distance of multi-year highs. This movement in benchmark rates triggered broader equity market weakness, with the Nasdaq declining more than 1% and the S&P 500 sliding 0.4% by mid-morning trading.

Digital assets proved particularly sensitive to this macro shift. Bitcoin, which had been trading just below the $101,000 level during European afternoon sessions, experienced a sharp pullback to approximately $97,800 following the data prints. The leading cryptocurrency surrendered the previous day’s gains and declined roughly 4% over a 24-hour window. The market correction extended beyond Bitcoin, with Ethereum dropping 6-7%, Solana falling 6-7%, and Avalanche and Chainlink both shedding 8-9% of their value—amplifying losses that would have consequences for leveraged traders.

The Liquidation Event: $300M in Derivative Positions Wiped Out

The rapid price decline triggered a cascade of liquidations across cryptocurrency derivatives markets. According to CoinGlass data, the sharp reversal wiped out nearly $300 million in long positions that had been leveraging bullish bets on further crypto price appreciation. This represented the first significant deleveraging event of 2026, as margin calls forced automated position closures and amplified selling pressure.

The scale of these liquidations underscored the leverage embedded in cryptocurrency derivatives markets and how quickly sentiment shifts can translate into concrete financial damage for speculative traders who had positioned aggressively ahead of this macroeconomic crosscurrent.

Fed Rate Cut Expectations Plummet Amid Economic Strength

The strong employment and services data prompted a dramatic reassessment of monetary policy expectations. Market participants had already essentially priced out any possibility of a rate cut at the Federal Reserve’s January meeting, but the economic announcements pushed expectations even further into dovish retreat.

According to the CME FedWatch tool, the probability of a 25 basis point rate cut at the March Fed meeting dropped sharply to approximately 37%, down from nearly 50% just one week prior. Looking further ahead, odds of a May rate cut also fell well below the 50% threshold. Kyle Chapman of Ballinger Group noted that investors have now adjusted their full-year 2025 outlook to reflect pricing for roughly just one 25 basis point rate reduction across the entire 12-month period.

This recalibration of rate-cut expectations directly weighed on cryptocurrencies, which had benefited from the earlier assumption of near-term monetary accommodation. The prospect of a restrictive Fed policy environment created headwinds for risk assets across the board.

Technical Recovery and the Path Forward for Crypto Assets

Despite the bearish initial reaction, cryptocurrency markets demonstrated resilience as technical dynamics came into play. Bitcoin subsequently rebounded back toward the $69,000 level in what some market analysts described as a sharp short-squeeze rally, boosting related altcoins including Ethereum, Solana, Dogecoin, and Cardano alongside crypto-focused equities such as Circle and Coinbase.

Joel Kruger of LMAX Group cautioned that the rebound appeared to be primarily a technical bounce driven by speculative short-covering in a relatively thin-liquidity environment, rather than a reflection of fundamental improvements. He urged market participants to maintain caution regarding the durability of such tactical rallies.

Joshua Lim of FalconX observed that certain market participants were attempting to capitalize on the momentum shift by rotating aggressively into volatile altcoins and options strategies, suggesting that some risk appetite had returned following the initial panic selling.

For the cryptocurrency market to establish a sustainable uptrend beyond these technical bounces, Kruger emphasized that Bitcoin would need to decisively breach key resistance levels around $72,000 and $78,000 on a sustained, rather than merely intraday, basis. These psychological and technical barriers would serve as meaningful tests of the broader market’s conviction.

The episode illustrated how tightly woven cryptocurrency valuations have become with macro conditions, Fed policy expectations, and broader financial market dynamics—reinforcing the need for crypto investors to closely monitor traditional market signals and economic data releases.