Markets in turmoil: Cryptocurrencies are facing a financial storm

Financial markets have been rocked by a wave of jitters, causing a major correction in Bitcoin (BTC) and major altcoins. Within a few hours, the major cryptocurrency fell below the critical threshold of $100,000, while Ethereum (ETH) collapsed below $3,400. This decline comes against the backdrop of deteriorating global economic conditions. There are several factors that explain this storm in the cryptocurrency market. On the one hand, US bond yields are rising. On the other hand, the monetary policy pursued by the US Federal Reserve still has a significant impact on market confidence. At the same time, the global economic environment continues to be characterized by additional stressors. In the face of these turmoil, the cryptocurrency market is experiencing a period of high volatility, as investor caution mixes with panic movements. This correction now raises the question of a possible short-term recovery or extension of the downtrend due to the uncertain macroeconomic environment.

Threat of interest rates

The recent decline in cryptocurrencies is part of the context of a broad decline in risk assets, which is largely influenced by the development of US bond prices. For several days, the nation’s bond yields have been steadily increasing, making these investments more attractive than volatile markets like cryptocurrencies. The yield on 10-year bonds reached 4.70%, while the yield on 5- and 30-year bonds rose to 4.50% and 4.61%, respectively. This phenomenon encourages a shift of capital towards investments that are perceived as safer, at the expense of more speculative assets e.g Bitcoin And technology stocks.

At the same time, decisions made by the US Federal Reserve are amplifying pressures on the market. Minutes from the latest meeting revealed that interest rate cuts initially expected for 2025 may be lower than expected. This revision dampens investor enthusiasm and affects the liquidity of the cryptocurrency market, which generally thrives in a more favorable monetary environment.

In addition, the unexpected flexibility of the US labor market further complicates the situation. Indeed, with 8.1 million jobs created in November, labor market strength indicates continued inflationary pressures, further reducing the prospects for rapid easing of monetary policy. Thus, the Fed, keen to contain inflation, may maintain high interest rates for an extended period, a historically unfavorable scenario for cryptocurrencies.

Thus, all these factors create an unfavorable environment for risky assets, where investor caution outweighs speculation. In the face of this combination of economic and monetary pressures, The cryptocurrency market is going through a period of increasing uncertaintywhich was characterized by an intensification of selling operations and a significant increase in volatility.

A market under high stress: economic uncertainty and volatility

Beyond the Fed’s decisions, other macroeconomic factors are contributing to a climate of widespread distrust. Budget management under the Trump administration raises growing concerns. In addition, the increase in the public deficit and the lack of a clear strategy on the part of the US Treasury are exacerbating concerns of an unstable financial environment. Uncertainty regarding fiscal policy and financing of public spending is prompting some investors to adopt a more cautious stance, avoiding risky assets such as cryptocurrencies.

In this context, Arthur Hayes, former CEO of BitMEX, believes that two major events could exacerbate cryptocurrency volatility in the coming months. According to him, the replenishment of the Treasury General Account (TGA) and the tax season in April threaten to reduce dollar liquidity in the markets, which would put additional pressure on cryptocurrencies. However, if the US Treasury needed to replenish its reserves, it could lead to a temporary drying up of capital flows, a phenomenon that has often coincided with declines in Bitcoin and other cryptocurrencies in the past.

The repercussions of these economic tensions led to a significant decline in prices. Within a few hours, Bitcoin (BTC) lost 5.04%, falling to $96,556, while its trading volume rose by 13%, reaching $55.12 billion. This intense activity reflects a turbulent market, as investors respond quickly to economic signals.

Ethereum (ETH) has not been rescued. Its price fell by 8%, to $3,370, while its trading volume increased by 21%, indicating increased volatility. Meanwhile, Dogecoin (DOGE) recorded a loss of 9.12%, showing the extent of the decline affecting the entire cryptocurrency market.

In the face of this instability, investors adopt conflicting strategies. Some, gripped by panic, resort to liquidating their positions to limit their losses, while others see this decline as an opportunity to accumulate assets at discounted prices. Such a discrepancy between surrender sales and strategic purchases increases market volatility.

This correction highlights how sensitive the cryptocurrency market is to monetary decisions and macroeconomic tensions. While some observers believe that the first quarter of 2025 may see a temporary rebound due to increased liquidity, others warn that uncertainties related to the budget and… Fed tightening It can prolong this downward phase. For investors, the challenge now is their ability to adapt to an environment where every economic announcement could trigger a trend reversal.

Disclaimer

The views, thoughts and opinions expressed in this article are solely those of the author and should not be considered investment advice. Do your own research before making any investment decisions.