Crypto markets experienced a significant downturn on Thursday as investors reacted to a revised U.S. economic growth report that exceeded expectations. The U.S. government announced that the gross domestic product (GDP) expanded at an annualized rate of 3.8% in the second quarter, up from an earlier estimate of 3.3% and significantly above the initial 3% figure.
In addition to the GDP revision, initial jobless claims dropped considerably to 218,000 from 232,000 the previous week, defying predictions of a rise to 235,000. This unexpected improvement in employment data stirred doubts about a weakening labor market and heightened speculations regarding future Federal Reserve actions.
As a result of the robust economic indicators, expectations for the Federal Reserve to cut interest rates in the coming month diminished. According to the CME FedWatch, traders now assign a 17% chance that the Fed will opt to keep interest rates unchanged, a notable increase from just 8% the day before.
In reaction to these developments, the 10-year U.S. Treasury yield surged to nearly 4.20%, the highest level observed in three weeks, contributing to a broader decline in U.S. stocks. The Nasdaq composite index fell by more than 1%, although it later managed to reduce its losses to 0.5%.
In the cryptocurrency sphere, Bitcoin experienced a notable drop, plummeting below $111,000 to its lowest point since early September before rebounding slightly to $111,500, marking a 1.6% decrease in the last 24 hours. Ethereum also faced steep losses, falling below the $4,000 threshold with a 4.5% decline over the same period. Other cryptocurrencies, such as Solana (SOL), Dogecoin (DOGE), Avalanche (AVAX), and Sui (SUI), reported even sharper declines.
After several months of outperforming Bitcoin, Ethereum has lost substantial ground, with the ETH/BTC ratio now flat for the year, a stark contrast to the 20% increase seen just four weeks ago. Solana, which enjoyed a surge in popularity amid a surge of interest in digital asset treasury companies and corporate adoption, saw a 6% decline in the past 24 hours and nearly 20% over the past week.
The negative sentiment extended to crypto-related stocks, which saw widespread sell-offs. MicroStrategy (MSTR), known for being the largest corporate holder of Bitcoin, fell by 4.5%. Major crypto exchange Coinbase (COIN) also dropped 4.1%. Meanwhile, crypto mining companies faced even steeper declines, with Cipher Mining (CIFR) down 9.4%, despite an initial rally fueled by news of a Google AI hosting deal. Other mining stocks, such as HIVE Digital (HIVE), Bitdeer (BTDR), and Bitfarms (BITF), experienced declines ranging from 6% to 8%.
Furthermore, stablecoin issuer Circle (CRCL) retreated 4.4%, while Galaxy Digital (GLXY) saw a decline of 3.7%, emphasizing the pervasive weakness across the entire sector as investors responded to the economic outlook and interest rate speculation.
