By Callum Keown
Bitcoin, XRP, and other cryptocurrencies were under pressure early Wednesday as traders assessed another sharp pullback.
But this slump may be different and significant -- it appears to be a reaction to U.S. economic data.
Bitcoin was trading just below $96,000 early Wednesday, falling from close to $102,000 just 24 hours earlier, according to CoinDesk data. The world's largest crypto fell 5.7% Tuesday, its largest drop since Dec.18, according to Dow Jones Market Data.
Ether, the second largest crypto asset, was 8% down over 24 hours at $3,362. XRP, which surged after president-elect Donald Trump won November's election, was down 4.9% at $2.34. The token is used to settle transactions on Ripple's digital-payments platform.
Bitcoin reached the $100,000 milestone again Monday for the first time since Dec.19, but its time above that key level again looks to be short-lived. Economic data may have been behind Bitcoin's slump--stocks also fell Tuesday and bond yields rose as job openings and manufacturing data were robust, casting further doubt on the path of interest rates.
In the aftermath of Trump's election win, digital assets spiked on the prospect of a crypto-friendly president. A raft of favorable appointments to the Trump administration helped the momentum going well into December.
But the regulatory, or political, catalysts may be running out of steam for now, leaving cryptos more exposed to other factors.
"Interestingly, Bitcoin--which has shown a low sensitivity of late to the U.S. data flow and U.S. bond yields--did react to the U.S. data," Pepperstone analyst Chris Weston said late Tuesday.
If Bitcoin and other coins are suddenly reacting to U.S. economic data then that's a significant shift that crypto investors need to be mindful of.
It also makes Friday's December jobs report a much bigger deal for cryptocurrencies. Investors will want to see signs the labor market is cooling -- that would help stocks and potentially cryptos if the new-found link holds true.
Write to Callum Keown at callum.keown@dowjones.com
This content was created by Barron's, which is operated by Dow Jones & Co. Barron's is published independently from Dow Jones Newswires and The Wall Street Journal.
(END) Dow Jones Newswires
January 08, 2025 05:56 ET (10:56 GMT)
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