Crypto Prices Fall as Strong US Economic Data Dampen Rate Cut Hopes
Crypto prices continued their downward trend on Thursday, with crypto-related stocks also experiencing selling pressure following surprisingly strong US economic growth data.
The US government reported a second-quarter GDP expansion of 3.8% on an annualized basis, exceeding the previous estimate of 3.3% and significantly surpassing the initial 3%.
Adding to the economic strength, initial jobless claims fell to 218,000, lower than the previous week’s 232,000 and well below expectations of 235,000 – challenging the notion of a weakening labor market.
This robust data has diminished expectations for interest rate cuts by the Federal Reserve next month. Traders now assign a 17% probability to the Fed holding rates steady, up from 8% earlier in the day, according to CME Fedwatch.
The yield on the 10-year US Treasury note rose to nearly 4.20%, its highest level in three weeks. This contributed to a decline in stocks, with the Nasdaq falling over 1%. It has since partially recovered, reducing the loss to 0.5%.
Already under pressure in recent days, Bitcoin (BTC) dipped below $111,000 to its lowest price since early September before rebounding to $111,500, a 1.6% decrease over the last 24 hours. Ethereum (ETH) fell below $4,000, down 4.5% in the same period, while Solana (SOL), Dogecoin (DOGE), Avalanche (AVAX), and Sui also experienced significant declines.
ETH has significantly underperformed Bitcoin in recent months, with the ETH/BTC ratio falling to a year-low compared to 20% four weeks ago. Solana (SOL), a recent market favorite due to increased adoption and activity in the digital asset space, is down 6% in the last 24 hours and nearly 20% over the past week.
Stocks Decline
Crypto-related stocks also suffered substantial losses on Thursday. MicroStrategy (MSTR), the largest corporate holder of Bitcoin, fell 4.5%, while crypto exchange Coinbase (COIN) dropped 4.1%. Mining companies were hit even harder: Cipher Mining (CIFR), despite an earlier rally following news of a Google AI hosting deal, declined 9.4%, while Hive Digital (Hive), Bitdeer (BTDR), and Bitfarms (Bitf) plunged 6% to 8%.
Circle (CRCL), the issuer of the USDC stablecoin, also decreased by 4.4%, and Galaxy Digital (GLXY) slid 3.7%, extending the weakness in the sector.