Cardano’s ADA led the crypto market’s downturn on Thursday, reflecting a broader weakness as Bitcoin failed to show signs of recovery. This stall in Bitcoin’s momentum has diminished the likelihood of a rally in altcoins, leaving traders cautious.
Bitcoin (BTC) experienced a sharp decline, falling to approximately $93,000 on Wednesday. This drop came on the heels of strong economic data in the U.S., which caused treasury yields to surge and equity markets to falter. The latest report from the Institute for Supply Management (ISM) revealed that U.S. service providers outperformed expectations, with the prices-paid index reaching its highest level since early 2023. The ripple effect of this data was felt across the cryptocurrency market, dragging major tokens down.
The sell-off wasn’t limited to Bitcoin. Over the past week, traders have taken profits from a short-lived rally, leaving Cardano’s ADA, Solana’s SOL, Binance Coin (BNB), and Ether (ETH) down nearly 10% since Monday. The CoinDesk 20 (CD20), a liquid index tracking the largest cryptocurrencies, declined 2.87% in the last 24 hours, compounding Wednesday’s 7% drop. The market’s current trajectory reflects broader concerns over risk assets.
Options markets for the S&P 500 index have also signaled growing downside risk compared to a year ago. This trend suggests that traders are increasingly favoring safer investments like bonds over riskier assets, including cryptocurrencies. Analysts attribute this defensive positioning in part to apprehensions about the upcoming inauguration of President-elect Donald Trump on January 20. According to CoinDesk’s Omkar Godbole, there is speculation that the event could act as a “sell-the-news” trigger. In the months leading up to the inauguration, markets have seen increased risk-taking, driven by hopes of pro-corporate and pro-economy reforms under Trump’s administration. However, a wave of profit-taking might temper this optimism.
Expectations are high that Trump’s presidency could bring significant changes to cryptocurrency regulations, with some speculating about the establishment of a strategic Bitcoin reserve. These potential policy shifts could provide the foundation for a future rally in digital assets. Singapore-based QCP Capital echoed this sentiment in a Thursday market update, advising traders to keep a close watch on upcoming U.S. economic data.
“All eyes are on this week’s FOMC and NFP releases, which are expected to further influence Bitcoin’s price trajectory,” QCP noted in a Telegram broadcast. “With market anticipation building, we believe Bitcoin’s pullback is merely a pause, setting the stage for a bullish rally as Trump’s inauguration fuels optimism.”
The Non-Farm Payrolls (NFP) report, a key economic indicator, is due on Friday. This monthly report provides insights into U.S. job creation, excluding agricultural employment, and serves as a barometer for the economy’s health. Strong NFP figures could signal a robust economy, potentially leading to interest rate hikes that negatively impact risk assets like Bitcoin. Conversely, weak NFP data might suggest sustained or lower interest rates, which could bolster risk assets.
As the market braces for these developments, traders remain on edge, weighing the implications of upcoming economic reports and political changes. The interplay between these factors will likely determine the cryptocurrency market’s trajectory in the weeks to come.