This week, crypto investors likely found themselves reminiscing about the favourable trends of 2024, a time when their assets frequently appreciated. Recent days have witnessed a significant contraction in the market for coins and tokens, as even leading names in the sector have reported double-digit losses.
Data from S&P Global Market Intelligence reveals that Chainlink, a prominent utility token, experienced a decline of nearly 16% in value over the past week. Uniswap experienced a modest decrease of 15%, while Bitcoin Cash investors might find some solace in a comparatively mild drop of 10%. Aave experienced a significant decline, dropping over 19%.
Throughout the week, macroeconomic news and developments contributed to declining investor enthusiasm for cryptocurrencies.
The Bureau of Labour Statistics (BLS) released the latest employment figures. The latest jobs data set has significant implications for investors, revealing that the number of job openings in the country increased to 8.1 million in November. In October, the reported figure reached 7.8 million. The increase in job openings indicates a robust performance among businesses, a trend poised to elevate the economy further.
The situation may deter the Federal Reserve from further reducing its key interest rates and heightening the rate increase likelihood. Cryptocurrency enthusiasts express concern over rising interest rates, which enhance the appeal of safer investments such as government bonds, thereby diminishing interest in riskier assets, including most cryptocurrencies.
In a striking development, Michelle Bowman, a member of the Federal Reserve’s board of governors, characterised the recent rate cut in December as a final measure in the regulator’s ongoing monetary policy strategy during her remarks on Thursday.
She also stated that it would be prudent for the Fed to avoid making assumptions about the future policies of the incoming administration.
“Instead, we should wait for more clarity and then seek to understand the effects on economic activity, the labour market, and inflation,” Bowman stated a sentiment that offered little reassurance to the numerous advocates for rate cuts within the crypto-verse.
The recent developments have led to a notable decline in the value of digital coins and tokens, with many experiencing a drop at a double-digit rate, reflecting their inherent volatility as assets. The market is currently projecting a low probability of interest rate cuts soon. The situation presents an opportunity for cryptocurrency enthusiasts, as it positions numerous digital currencies for a potential rebound when favourable news or statements from Federal Reserve officials emerge in the media.