Why Bitcoin and Altcoin are Dropping? Here are All the Detailed Reasons

The world's largest cryptocurrency, Bitcoin, has dropped below $95,000, continuing its downward trend as the cryptocurrency market as a whole has to endure significant losses. At the time of writing, Bitcoin is trading at $94,771, with many altcoins dropping 20-30%. The market turmoil comes after surprisingly strong economic data from the United States, raising concerns about a prolonged period of high interest rates.

This decline is driven by the release of strong US economic and labor confidence indices, including: JOLTS job openings: 8.1 million (expected more than 7.7 million).Service PMI: 54.1 (better than the expected 53.3).ISM service price: 64.4 (much higher than the expected 57.5). While positive economic data often signals good news for traditional markets, it tends to have the opposite effect on riskier assets like Bitcoin and altcoins. A strong labor market and increased confidence in economic activity suggest that the Fed may delay interest rate cuts, a scenario that has dampened interest in cryptocurrencies. The cryptocurrency market, positioned for weaker economic data, may support a more dovish Fed stance. Instead, the unexpected strength in the labor market has given the Fed 'two reasons to maintain high interest rates,' as analysts have said: Labor market recovery: Higher income increases consumer spending, potentially leading to inflation. Service prices: Sharp increase in service prices is adding to inflationary pressures. Inflation remains a concern, and the market expects fewer interest rate cuts in 2024. As a result, long-term US Treasury bond yields have risen, a development that often puts pressure on Bitcoin as it is sensitive to tighter monetary policies. In addition to the pressure, the interest of retail investors in cryptocurrencies has also decreased. Google search trends show a sharp decline in interest in Bitcoin and altcoins since the peak in December. The investment volume of retail investors, the main driving force of previous market increases, has also decreased significantly in recent weeks, with purchases under $10,000 decreasing. The failure of Bitcoin to hold its price above $100,000 has caused additional selling pressure, as long-term holders sell off a large amount of Bitcoin at this level, reminiscent of the $70,000 sell-off in March 2024. The US Dollar Index (DXY) continues to rise sharply, adding pressure to Bitcoin. The strong dollar reduces the attractiveness of riskier assets such as cryptocurrencies. However, some analysts predict that the strength of the dollar may decrease in the coming months, which could help alleviate pressure on Bitcoin and altcoins. Although it is not uncommon for investors to sell off at the end of the year to make a profit, there are some important events in January that could affect market volatility: Today: FOMC Meeting Minutes. Friday: US Nonfarm Payrolls Report. January 15th: US Inflation Data for 2024. January 24th: Bank of Japan Interest Rate Decision. January 29th: FED Interest Rate Decision.