When U.S. Economic Indicators Trigger a Crypto Price Selloff: What Happened in Early 2025

Markets tend to react sharply when economic reality clashes with investor expectations, and early 2025 delivered just such a moment for digital assets. A series of stronger-than-expected U.S. economic reports sent cryptocurrency prices into a steep decline, wiping out weeks of gains and forcing traders to confront rising interest rate expectations across the broader macro environment. Understanding how traditional economic data flows through to crypto markets reveals the increasingly interconnected nature of these asset classes.

Economic Data Delivers an Unexpected Shock to Crypto Price Momentum

In early January 2025, two economic releases caught markets off-guard and reshaped investor sentiment almost immediately. The Bureau of Labor Statistics reported that job openings (JOLTS data) rose to 8.1 million in November, significantly exceeding analyst expectations of a decline to 7.7 million. Released simultaneously, the ISM Services Purchasing Managers Index came in at 54.1 for December, well above the anticipated 53.3 and notably higher than November’s 52.1 figure. The Prices Paid subindex, a measure of inflation pressure, hit 64.4—substantially above both expectations (57.5) and the prior month (58.2).

These data points, while potentially seeming routine to casual observers, ignited a reaction across fixed-income markets. The 10-year U.S. Treasury yield jumped five basis points to 4.68%, approaching multi-year highs and signaling that investors were repricing their assumptions about future Federal Reserve policy. The Nasdaq fell more than 1% while the S&P 500 declined 0.4%, with equities broadly absorbing the implications of stickier inflation and stronger labor demand.

Bitcoin and Major Altcoins Face Sharp Crypto Price Correction

Cryptocurrency markets bore the brunt of this sentiment shift. Bitcoin, which had been trading just below $101,000 during European afternoon hours, retreated to $97,800 following the data release—a decline exceeding 4% over the subsequent 24 hours. The crypto price weakness extended across the ecosystem, with Ethereum (ETH) and Solana (SOL) each dropping between 6% and 7%. More severe declines struck Avalanche (AVAX) and Chainlink (LINK), which tumbled 8% to 9% respectively.

The sharp compression in valuations triggered significant liquidation activity. Nearly $300 million in long positions across derivatives markets were forcibly closed as leveraged traders faced margin calls, marking the first major deleveraging event of the year according to CoinGlass data. This mechanical selling pressure amplified the initial move, creating a cascade effect as stop-losses were triggered at key technical levels.

Rate Cut Expectations Collapse, Reshaping Crypto Market Outlook

Perhaps more consequential than the immediate price action was the shift in monetary policy expectations. Before the economic surprise, market participants had already abandoned hopes for a Fed rate cut at the January meeting. However, these reports caused investors to dramatically dial back expectations for the March meeting, with the CME FedWatch tool showing only a 37% probability of an easing move—down from nearly 50% just one week prior. Odds of a May rate cut fell well below 50% as well.

Looking across the full year 2025, analysts at Ballinger Group noted that market participants were pricing in only approximately one 25-basis-point rate cut for the entire twelve-month period. This stark downward revision had profound implications for crypto valuations. Digital assets had benefited substantially from market expectations of monetary easing earlier in the season, and the reversal of those expectations removed a key tailwind for crypto prices.

Market Technicals and Forward-Looking Sentiment

The broader context of this crypto price decline involved not just macro fundamentals but also technical positioning. Years of accumulated long leverage and thin liquidity conditions meant that any move lower could rapidly accelerate into a more severe washout. Traders at LMAX Group cautioned that while the rebound following the initial selloff demonstrated resilience, its durability remained questionable absent clear fundamental support.

Observers noted that some market participants were rotating from spot accumulation into more speculative positioning—chasing the rally through altcoins and leveraged options plays, according to commentary from FalconX. This suggested that despite the crypto price volatility, risk appetite had not been entirely extinguished, though the character of that demand had shifted markedly toward more tactical, shorter-term positioning rather than conviction-driven accumulation.

Key technical resistance levels at $72,000 and $78,000 for Bitcoin would be critical benchmarks for determining whether the decline represented a temporary correction or the beginning of a more structural downtrend. A sustained break above these levels would signal renewed strength; failure to clear them would suggest continued pressure on crypto prices.