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The cryptocurrency market faced a sharp sell-off on January 7, losing $250 billion in value within 24 hours. Bitcoin (BTC), the leading cryptocurrency, dropped to $96,000 from $102,000, marking a significant fall. Here are the key reasons why Bitcoin’s (BTC) price drops.
Key Reasons for the Drop
Bitcoin’s price dip coincided with a rise in the 10-year U.S. Treasury yield, driven by December’s stronger PMI data. The Institute for Supply Management reported a jump to 54.1, up from 52.1 in November, signaling unexpected growth in the U.S. services sector
This raised fears of inflation staying high, which could delay the Federal Reserve’s expected rate cuts. However, higher yields often hurt risky assets like cryptocurrencies.
Additionally, the November JOLTS report showed an increase in job openings, although hiring slowed down. Meanwhile, Worker confidence also dropped, as seen in the lower quit rate, which fell to 1.9% from 2.1% in October.
Impact on the Market
The drop in the crypto market added significant pressure on traders, leading to the liquidation of $561 million worth of long positions in just a single day. The largest liquidation order came from Binance, involving $17.74 million in ETHUSDT.
Meanwhile, other cryptocurrencies also suffered, with Ethereum losing over 8% and Solana falling more than 9%, and XRP by 5%.
Bitcoin ETF Recorded an Outflow
The price drop also negatively affected Bitcoin ETF inflows. After two consecutive days of inflows, Bitcoin ETFs experienced outflows of $543.7 million on 7 January.
The biggest outflows came from companies like Ark Investment, Grayscale, Bitwise, and Fidelity, all of which had previously invested large amounts into Bitcoin ETFs.
What’s Next for Bitcoin?
According to Glassnode analyst James Check, Bitcoin’s sell pressure is easing, but fresh demand is also slowing. Spot trading volumes have dropped by 53% since November, showing reduced market activity.
However, if the market regains momentum, reaching $100,000 again remains a key target for traders. On the other hand, if Bitcoin fails to hold above the $95,668 support level the price could drop further to $93,625.
