On Tuesday, cryptocurrency values dropped significantly, undoing part of the progress achieved on Monday, as apprehensions over the bond market grew more pronounced.
As an analyst, I’m observing a notable dip in the cryptocurrency market today. Bitcoin (BTC), for instance, has dropped by approximately 4% and touched an intraday low of $97,700. The same trend is reflected in other major players like Ethereum (ETH), Ripple (XRP), and Solana (SOL), each experiencing a decline exceeding 5%.
As a risk-averse atmosphere spread, it affected various financial markets, notably stocks. For instance, the Nasdaq 100 index plummeted by over 1%, ending at $19,635. Similarly, the S&P 500 dipped by 0.50%. Since these indices primarily consist of technology companies, they are more susceptible to changes in risk sentiment.
Major technology companies’ stocks experienced a setback as well. Shares of NVIDIA fell by 5.4%, erasing approximately $175 billion from their total market worth. Similarly, Tesla and Super Micro Computer saw declines of 3% and 1.5% respectively in their share prices.
It appears that the recent decline in stock prices might be due to an increase in U.S. bond yields, particularly before important economic updates such as the nonfarm payrolls figures and the minutes from the Federal Reserve meeting. The 10-year bond yield rose significantly by 1.7%, reaching 4.70%. Similarly, the 30-year and 5-year yields increased to 4.61% and 4.50% respectively.
An increase in bond yields often suggests that the Federal Reserve might adopt a more aggressive approach in monetary policy. In their December gathering, the Fed suggested less frequent interest rate reductions in 2025 than initially believed. The minutes of that meeting, set for release on January 8th, will offer additional information about the Fed’s deliberations regarding this matter.
The surge in job vacancies to a six-month peak, primarily in the service sector, has added further stress to Bitcoin and other digital currencies.
Before the official nonfarm payrolls figures come out this Friday, the report is due first. If the jobs report exceeds expectations, it might bolster the Federal Reserve’s aggressive stance, since a tighter job market would sustain high inflationary pressures.
According to certain financial experts, increased bond yields might cause a decline in Bitcoin, alternative cryptocurrencies, and other high-risk investments. In a recent communication, Mark Zandi, the Chief Economist at Moody’s, predicted that the growing budget deficits under President Trump could drive yields upward. This trend might then prompt investors to shift their funds from riskier assets such as cryptocurrencies towards safer options like money market funds.
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2025-01-07 20:16