Bitcoin, Ethereum, XRP: Victims of sell-off

On the 7th 0f January, Bitcoin [BTC] gave back its New Year gains on what analysts linked to hotter-than-expected U.S. economic data.

Bitcoin [BTC] began the 7th of January giving back its New Year gains in a sell-off that crypto analysts linked to hotter-than-expected U.S. economic data.

BTC dropped from $102K to hit lows of $94.5K, triggering a market-wide bloodbath. Ethereum [ETH] also saw a significant sell-off, dumping nearly 10% to lows of $3.3K. Among the top-10 losers, XRP saw a moderate sell-off of 6%.

Bitcoin, Ethereum, XRP: Victims of sell-off

A sticky inflation in the U.S. services sector, as tracked by the Institute for Supply Management (ISM) Purchasing Managers Index (PMI), showed that the price paid for inputs climbed to highs last seen in early 2023. This sparked a sell-off in the markets.

Reacting to the data, crypto analyst Benjamin Cowen noted, “The real reason it is going up is due to ISM prices paid, which also just came in: actual: 64.4, estimated: 57.5, prior: 58.2. Has not been this high since Feb 2023, making the market wonder if perhaps the Fed cut too soon?”

Another risk factor was a likely resilient U.S. labor market. Recent data showed more job openings than expected, which could factor into the Fed’s rate cut path in 2025.

This bodes well for risk-on assets like BTC, as a slower rate cut path could lead to cheaper capital. However, trading firm QCP Capital seemed to have pinned the sell-off on the Job Openings data.

“JOLTS job openings surged to 8.1M (vs. 7.74M forecast), sparking risk-off sentiment as long-term bond yields spiked. This triggered ~ $206M in liquidations within an hour.”

They also added that Friday’s upcoming NFP (nonfarm payroll) data could further gauge the state of the U.S. labor markets and impact the BTC price trajectory.

In the meantime, the 25-Delta Risk Reversal (25RR), an indicator that gauges the volatility premium between calls (bullish bets) and puts (bearish bets, downside protection), was negative for the 10th of January and 17th option expiry on Deribit.

The 24-hour negative skew suggested increased hedging activity against downside moves as demand for puts exceeded calls. This underscored a cautious negative sentiment.

However, the 25RR for the option expiry on the 31st of January was almost neutral at 0.65, indicating a slight premium for calls and indicating a moderate bullish to neutral bias.

Moreover, with the expected U.S. debt ceiling debate, the macro front could trigger wild price swings for BTC and the overall markets.