The crypto market has experienced significant volatility in early 2025, with Bitcoin and other major digital assets facing substantial price corrections. The primary catalyst for the market's recent decline has been the release of stronger-than-expected U.S. economic data. The Institute for Supply Management (ISM) reported a December Purchasing Managers' Index (PMI) of 54.1, surpassing forecasts and indicating unexpected resilience in the private service sector. This data, coupled with a robust labor market report showing 8.1 million job openings in November, has raised concerns about persistent inflationary pressures.

The strong economic indicators have led to a reassessment of Federal Reserve policy expectations. Market participants, who had been anticipating multiple rate cuts in 2025, are now recalibrating their outlook. The probability of rate cuts before June has dropped below 50%, with the Fed expected to maintain current interest rates at its upcoming January meeting. In response to the economic data, U.S. Treasury yields have surged. The 10-year bond yield reached 4.70%, making safer investments more attractive and drawing capital away from riskier assets like cryptocurrencies.

Bitcoin, which had reached a high of over $102K in early January, experienced a sharp decline of nearly 6%, settling around $95K. This drop erased gains made since late 2024, including the rally driven by optimism surrounding Donald Trump's presidential election victory and promises of crypto-friendly policies. The sell-off wasn't limited to Bitcoin. Ethereum fell over 8%, while other major cryptocurrencies like Solana and XRP saw declines ranging from 2% to 8%. The total crypto market capitalization dropped by approximately $500 billion from its December peak. The sudden price movements triggered significant liquidations in the crypto market. Over $700 million in long positions were liquidated within a 24-hour period, exacerbating the downward pressure on prices.