On Tuesday, U.S. Treasury yields soared significantly, exerting pressure on risk assets, with the cryptocurrency market being the most affected. According to Coin Metrics, the price of Bitcoin fell by 5% on the day, to $96,525.50, and Ethereum prices dropped by 8%. The broader cryptocurrency market, measured by the CoinDesk 20 Index, fell by 7% overall.
It's not only the digital currency market that suffered, but cryptocurrency-related stocks also took a hit. Coinbase's stock fell by more than 8%, and MicroStrategy's stock dropped by 9%. Additionally, shares of Bitcoin mining companies Mara Holdings and Core Scientific fell by about 7% and 6%, respectively.
The immediate trigger for this volatility was the latest data from the Institute for Supply Management (ISM), which showed that the U.S. services sector growth in December exceeded market expectations. This data fueled investor concerns about exacerbating inflation stubbornness. Subsequently, the 10-year U.S. Treasury yield rose quickly, and high yields often exert downward pressure on growth-oriented risk assets.
Bitcoin had performed strongly previously. On Monday, its price had surpassed the $102,000 threshold, and the market was full of expectations for Bitcoin to double its performance over the year, especially hoping for a clearer regulatory framework to inject confidence into the digital asset market, benefiting related enterprises like Coinbase and Robinhood. However, the uncertainty over the Federal Reserve's future monetary policy path remains a major concern. Though the Fed cut interest rates for the third consecutive time last December, the signals it sent indicated that the number of rate cuts in 2025 might be fewer than the market had expected.
Historically, interest rate cuts tend to have a positive impact on Bitcoin prices, whereas rate hikes have the opposite effect. Nevertheless, Bitcoin still recorded an increase of more than 3% since the beginning of 2025, while it had a full-year increase of up to 120% in 2024.
Looking ahead, market participants generally believe that the volatility of cryptocurrency prices will persist. On one hand, U.S. economic data and policy expectations will continue to dominate market sentiment; on the other hand, changes in the global cryptocurrency regulatory environment may bring new opportunities and challenges to the market. As investors seek signals, the price performance of Bitcoin and its related assets may become an important indicator for observing the direction of risk assets.
