Dogecoin (DOGE) took the hardest hit among major cryptocurrencies on Tuesday, plunging 10%, as Bitcoin (BTC) dipped below $96,000. The drop was triggered by a surge in U.S. Treasury yields following the release of stronger-than-expected economic data. Solana (SOL), Cardano (ADA), Binance Coin (BNB), and Ether (ETH) also saw declines, with losses ranging from 7% to 9%, while Bitcoin itself fell by 5.5%. The broader CoinDesk 20 (CD20) index, which tracks the largest cryptocurrencies by market cap, dropped 7.1%.

The market slump resulted in $560 million in liquidated long positions across cryptocurrency futures, marking the first major liquidation event of the year. The downturn in digital assets mirrored losses in the U.S. stock market, following a report from the Institute for Supply Management (ISM) that showed stronger-than-anticipated growth in the services sector. The “prices-paid” component of the ISM Services PMI reached its highest level since early 2023, signaling rising inflationary pressures.

In addition, U.S. job openings exceeded expectations, fueling concerns about a tightening labor market and pushing Treasury yields higher. The 10-year U.S. Treasury yield surged to 4.68%, its highest point since May, contributing to a broader sell-off in U.S. government securities.

The drop in cryptocurrency prices triggered liquidations, a process in which exchanges forcibly close leveraged positions due to margin calls. This created a domino effect, with falling prices leading to further liquidations and exacerbating the market decline.

Despite the sharp pullback, some analysts are optimistic about the long-term outlook for cryptocurrencies. Vince Yang, CEO of zkLink, noted that such sentiment shifts are typical for the market and historically, these dips often precede significant bullish movements. “We’re still positive about the future,” Yang said. “Given the current market cycle and a potentially more crypto-friendly U.S. administration, there’s reason to believe exciting times are ahead.”

However, QCP Capital is less optimistic about the short-term. The firm warned of continued volatility in January due to structural risks, including the reinstatement of the U.S. Treasury debt ceiling. QCP noted that discussions surrounding the debt ceiling could lead to market fluctuations as the government considers “extraordinary measures” to manage its spending.