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Cryptocurrency prices pulled back sharply on Tuesday, erasing some of the gains made on Monday as concerns about the bond market intensified.
bitcoin (btc) fell 4%, hitting an intraday low of $97,700. Similarly, ethereum (eth), Ripple (XRP), and Solana (SOL) fell more than 5%.
The decline aligned with a risk-averse sentiment that spread to other financial markets, particularly stocks. The Nasdaq 100 index fell more than 1% to $19,635, while the S&P 500 fell 0.50%. These indices, heavily dominated by technology companies, tend to be more sensitive to risk sentiment.
Popular tech stocks also took a hit. NVIDIA shares plunged 5.4%, wiping out more than $175 billion in market value. Tesla shares fell 3%, while Super Micro Computer fell 1.5%.
The sell-off was likely driven by rising U.S. bond yields ahead of key economic reports, including nonfarm payrolls data and Federal Reserve minutes. The 10-year bond yield rose 1.7% to 4.70%, while the 30-year and 5-year bond yields rose to 4.61% and 4.50%, respectively.
Rising bond yields typically signal expectations of a more aggressive stance from the Federal Reserve. At its December meeting, the Federal Reserve hinted at two interest rate cuts in 2025, less than previously anticipated. The minutes of that meeting, which will be released on Wednesday, January 8, will provide more information about the Federal Reserve's discussions.
bitcoin and other cryptocurrencies faced additional pressure after a Labor Department report showed job openings rose to a six-month high, driven by the services sector.
The report precedes official nonfarm payrolls data, which will be released on Friday. A better-than-expected jobs report could reinforce the Federal Reserve's hawkish approach, as a tight labor market would keep inflation pressures high.
Some analysts believe that rising bond yields could crash bitcoin, altcoins, and other assets. In a recent note, Mark Zandi, chief economist at Moody's, warned that rising deficits under Donald Trump could push yields higher. That, in turn, would lead to a rotation out of risky assets like cryptocurrencies into money market funds.
