Economic Tailwinds Flip to Headwinds: How U.S. Data Triggered a Crypto Market Shock

When stronger-than-expected economic data crossed the wires in early January 2025, few anticipated the ripple effects that would soon rattle the crypto sector. Bitcoin and major altcoins became collateral damage in a broader reassessment of Federal Reserve policy, as markets fundamentally reset their expectations for monetary easing. This shock—which saw the crypto market absorb nearly $300 million in liquidations—underscores how tightly intertwined digital assets have become with macroeconomic crosscurrents.

The Economic Surprise That Spooked Markets

The trigger came from two consecutive data releases that painted a rosier picture of the U.S. economy than anticipated. The Bureau of Labor Statistics reported that job openings in November unexpectedly climbed to 8.1 million, beating analyst forecasts for a decline to 7.7 million. Released simultaneously, the ISM Services Purchasing Managers Index for December arrived at 54.1, surpassing expectations of 53.3 and building on November’s 52.1 reading.

Most notably, the Prices Paid subindex within the ISM report came in scorching at 64.4—far exceeding the consensus estimate of 57.5 and the previous month’s 58.2. Though these releases might seem mundane to traditional markets, their combined effect proved destabilizing for crypto. The data bolstered the bond market’s ongoing jitters, sending the 10-year U.S. Treasury yield higher by five basis points to 4.68%, edging closer to multi-year peaks.

How Rate Cut Expectations Collapsed

The implications for crypto were immediate and severe. With stronger economic data entering the picture, market participants dramatically scaled back their hopes for monetary relief throughout 2025. The CME FedWatch tool revealed the dramatic shift: a 37% probability for a March rate cut, down sharply from nearly 50% just a week earlier. Extending the outlook further, the odds of a May easing move also slipped well below 50%. Across the full year of 2025, forecasters now see only a single 25-basis-point rate reduction materializing—if that.

This reset rippled through equity markets as well. The Nasdaq suffered a decline exceeding 1% in late-morning trading, while the S&P 500 retreated 0.4%. Crypto, however, bore the brunt of the selloff.

The Crypto Bloodbath: Liquidations and Price Collapse

Bitcoin, which had been trading just shy of $101,000 through European afternoon trading, descended to $97,800 following the data release—erasing the prior day’s gains and marking a 4% downturn over the 24-hour span. Major altcoins fared even worse. Ethereum’s ether (ETH) dropped 6% to 7%, Solana’s SOL fell 6% to 7%, while Avalanche’s AVAX and Chainlink’s LINK suffered steeper losses of 8% to 9%.

The swift repricing of crypto assets triggered a deleveraging cascade across derivatives markets. CoinGlass data recorded approximately $300 million in long position liquidations—marking the first significant leverage flush of 2025 as traders betting on continued rallies were forcefully unwound from their positions.

Understanding the Crypto Market’s Macro Sensitivity

The episode highlighted crypto’s acute sensitivity to monetary policy shifts. When investors had been pricing in multiple rate cuts throughout 2025, risk assets broadly—including digital currencies—benefited from the narrative of easing financial conditions. The abrupt reversal of those expectations proved destabilizing. Kyle Chapman of Ballinger Group noted that the market now sees only one 25-basis-point rate cut remaining for all of 2025, a dramatic compression from earlier bullish forecasts.

This relationship between interest rates and crypto valuations reflects the sector’s ongoing evolution. As institutional capital has flowed into digital assets, traditional macroeconomic drivers have gained influence. Strong U.S. data that would normally buoy equities instead became a liability for crypto markets, which thrive in low-rate environments.

The Technical Rebound: Relief Without Catalyst

In the sessions following the initial shock, Bitcoin staged a sharp bounce that rippled through altcoins and crypto-related equities including Circle, Coinbase, and other blockchain-focused firms. However, this rebound warranted careful scrutiny. LMAX Group’s Joel Kruger warned that the move appeared driven primarily by technical positioning and thin liquidity rather than by meaningful fundamental improvements.

FalconX’s Joshua Lim observed that some funds were chasing the rally by rotating into volatile altcoins and options, suggesting that positioning dynamics—not fresh conviction—were fueling the bounce. This distinction matters for assessing crypto’s durability. Key technical resistance levels around $72,000 and $78,000 must be consistently reclaimed on a structural basis to signal a genuine reversal in the broader downtrend.

Looking Ahead: Crypto’s Macro Crossroads

As of late February 2026, Bitcoin trades around $68,220 with a modest 4.27% 24-hour gain, while Ethereum has recovered 7.83% and Solana 7.69% over the same period. Avalanche and Chainlink have gained 11.17% and 8.54% respectively, suggesting the crypto market has gradually digested the initial shock from early 2025.

Yet the episode remains instructive: crypto remains highly reactive to shifts in monetary policy expectations. The early 2025 liquidation cascade demonstrated that even small upside surprises in economic data can trigger cascading liquidations and forced position exits across leveraged crypto markets. Looking ahead, monitoring Fed communications and macroeconomic calendars will remain critical for anticipating crypto volatility and market turning points.