TLDR
- Bitcoin fell from $102,000 to $96,145 within 24 hours, marking a 5.7% decline
- The drop coincided with US Treasury yields hitting an eight-month high of 4.685%
- Bitcoin ETF inflows fell 94% to $52.9 million, down from $987 million the previous day
- Job openings unexpectedly rose to 8.098 million in November, indicating continued economic strength
- BlackRock’s IBIT was the only Bitcoin ETF to see positive inflows ($596.11 million), while others saw outflows
Bitcoin experienced its second major price drop in less than a month, falling from $102,000 to $96,145 on January 7, 2025. as fresh economic data prompted investors to reassess their positions in cryptocurrency markets.
The price drop came as US Treasury yields climbed to their highest level since April 2024, with the benchmark 10-year yield rising 7.5 basis points to 4.685%. This increase in yields has drawn investors into traditional government securities and away from riskier assets such as cryptocurrencies.
US Department of Labor latest report showed that the number of jobs increased by 259,000 to 8.098 million in November, reaching a six-month high. This figure exceeded economists’ expectations of 7,740 million and indicates continued strength in the labor market.
The unexpected strength of the employment data prompted market participants to adjust their expectations regarding Federal Reserve policy. While earlier projections suggested multiple cuts in interest rates in 2025, current indicators point to smaller cuts than previously expected.
Bitcoin ETF Markets reflected this changing mood, with total inflows falling to $52.9 million on January 7, down from $987 million the day before. This 94% reduction in inflows highlights how quickly investor enthusiasm can change in response to economic indicators.
Among various Bitcoin ETF products, BlackRock’s IBIT stood out as the only fund to see positive inflows, attracting $596.11 million in new investments. This inflow helped offset outflows from other funds in the market.
21Shares’ ARK and ARKB saw the biggest outflows, with $212.55 million from the fund. Grayscale products also saw significant withdrawals, with GBTC and BTC seeing outflows of $125.45 million and $113.85 million respectively.
Fidelity’s FBTC reported an outflow of $86.29 million, while Franklin Templeton’s EZBC saw a smaller outflow of $5.58 million. Other Bitcoin ETFs in the market reported no flows during this period.
Despite the reduced inflow, daily trading volume for Bitcoin ETFs rose to $4.62 billion on January 7, up from $3.96 billion the previous day. This higher trading volume suggests active repositioning of market participants rather than simple market inactivity.
The December ISM services index added to the economic picture, rising to 54.1 and beating the forecast of 53.5. This data is another indicator of economic resilience, potentially supporting the case for a smaller interest rate cut.
The Federal Reserve has already signaled plans for about two interest rate cuts in 2025, fewer than market participants had previously hoped. The strength of recent economic data may further support this more measured approach to monetary policy.
Investors are now awaiting the minutes of the Federal Reserve meeting, which is scheduled to be released on January 8, 2025. These minutes may provide additional insight into policymakers’ thoughts on the timing and extent of potential rate cuts.
The upcoming nonfarm payrolls report, due on Friday, is another key piece of economic data that could influence market direction. A stronger-than-expected jobs report could boost expectations of a delayed rate cut.
Recent price action has also weighed on the broader cryptocurrency market, occurring alongside a larger market selloff that has affected US stocks. The combined market movements resulted in approximately $625 billion being wiped from the valuation of US stocks on the same day.
Traditional safe-haven assets have benefited from this market repositioning, with US Treasuries seeing increased demand as investors look for lower-risk alternatives in the current economic environment.
