Why did Bitcoin plummet to $95,500 today?

On January 8, the cryptocurrency market witnessed a sell-off, causing the total capitalization to drop by $250 billion within 24 hours.

Bitcoin (BTC), the market-leading cryptocurrency, fell from $102,000 to $95,500. The altcoins also fell sharply, with ETH losing more than 8%, SOL down more than 9%, and XRP down 5%.

This decline coincided with several important macroeconomic factors:

• US bond yields rise:The yield on 10-year US Treasury bonds rose due to positive December Purchasing Managers Index (PMI) data (54.1 points from November's 52.1 points). This points to growth in the services sector, raising concerns about lingering inflation and the possibility of the Fed delaying interest rate cuts.
• The US labor market is strong:The November JOLTS report showed the number of jobs being hired rose to 8 million, beating forecasts of 7.7 million. Sectors such as professional and business services, finance and insurance, and private education all recorded growth in the number of jobs. The latest jobs data also reinforce perceptions of a strong labor market, which could prompt the Fed to keep interest rates higher for longer.

These two factors combined have put pressure on risk assets, including cryptocurrencies, prompting investors to readjust expectations of a Fed rate cut. The CME FedWatch tool predicts a 95% probability that the Fed will keep interest rates unchanged at its upcoming meeting on Jan. 29.

This sell-off has caused significant impacts on the financial markets in general and the cryptocurrency market in particular:

• Mass Liquidation:The market's decline put pressure on traders, resulting in the liquidation of $693 million worth of long orders in 24 hours. The largest liquidation order came from the Binance exchange, with a value of $17.74 million in the ETH/USDT pair.
• Bitcoin ETF capital outflows receding: Bitcoin ETFs saw $543.7 million in negative capital inflows on Jan. 7 after two days of positive capital inflows. Funds with the largest ETF withdrawals include Ark Investment, Grayscale, Bitwise, and Fidelity.
• Crypto stocks fall: Shares of companies related to cryptocurrencies are also affected. Coinbase shares fell more than 8 percent, MicroStrategy fell more than 9 percent, Mara Holdings fell 7 percent and Core Scientific fell 6 percent.
• US stock markets fall: The S&P 500 fell 1.1 percent and the Nasdaq Composite dropped 1.9 percent. Nvidia shares fell 6.2 percent despite CEO Jensen Huang announcing new AI initiatives at CES.

Although the market is facing many challenges, some experts remain optimistic about the long-term prospects of Bitcoin and the cryptocurrency market.

Specifically, according to Greekslive, the correction of the cryptocurrency market was mainly influenced by the strengthening of the dollar and the fall of US stocks. Bitcoin's bullish trend has not fundamentally changed.

The options data shows that the short-term volatility index has recovered slightly but remains low. Options spreads and futures price gains are also not subject to much volatility. The general view of Greekslive is that this adjustment is only temporary.

The cryptocurrency market is constantly volatile, investors need to monitor important economic indicators, the policy decisions of the FED combine technical analysis to predict price movements. The interaction between these factors will shape the trends of Bitcoin and other digital assets in the coming months.