Market Volatility Hits Cryptocurrencies
The cryptocurrency market took a hit on Tuesday, with Bitcoin plummeting 4.8% to $97,183.80, according to Coin Metrics. The broader market, as measured by the CoinDesk 20 index, dropped a staggering 5%. This sudden downturn was triggered by a spike in Treasury yields, which put pressure on risk assets across the board.
Treasury Yields on the Rise
The 10-year U.S. Treasury yield surged following the release of data by the Institute for Supply Management, which revealed faster-than-expected growth in the U.S. services sector in December. This increase in yields tends to negatively impact growth-oriented risk assets, including cryptocurrencies.
Crypto Stocks Take a Hit
The decline in cryptocurrency prices had a ripple effect on crypto-related stocks. Coinbase and MicroStrategy plummeted 7% and 9%, respectively, while Bitcoin miners Mara Holdings and Core Scientific fell around 5% each.
Regulatory Clarity and Interest Rates
Despite the current volatility, investors remain hopeful that clearer regulation will support digital asset prices and benefit stocks like Coinbase and Robinhood. However, uncertainty surrounding the path of Federal Reserve interest rate cuts could pose a challenge for crypto prices. Historically, rate cuts have had a positive effect on Bitcoin prices, while hikes have had a negative impact.
Bitcoin’s Performance
Bitcoin has still managed to post a 3% gain since the start of the year, building on its impressive 120% gain in 2024. While the current downturn may be a setback, many investors remain optimistic about the cryptocurrency’s potential for growth in the long term.
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