Crypto Market Bloodbath: Three Reasons Traders Are in Risk-Off Mode

Yahoo

6 days ago

As of the time of writing, according to CoinDesk Data, BTC was trading at around $113,648, down 1.4% in the past 24 hours. ETH, XRP, SOL and DOGE posted steeper declines, with ETH down 3.7% to $3,503, XRP off 1.5% at $2.94, SOL down 2.7% at $164.13 and DOGE dropping 3.7% to $0.1993.
The downturn followed a string of economic and geopolitical shocks on Friday that rattled investor sentiment across both equity and digital asset markets.
U.S. stocks also closed sharply lower on Friday, with the Dow down 1.23%, the S&P 500 off 1.6%, and the Nasdaq Composite plunging 2.24% as traders digested a disappointing jobs report, heightened tensions with Russia and the possibility of emergency monetary easing.
The July jobs report was a Disaster — and a surprise
The U.S. Bureau of Labor Statistics (BLS) reported Friday that the U.S. economy added just 73,000 jobs in July — well below expectations. More troubling, however, was a downward revision of 258,000 jobs to the combined May and June totals, effectively erasing most of the labor market gains previously reported for the second quarter.
The unemployment rate remained at 4.2%, but long-term unemployment climbed by 179,000 to 1.8 million. The number of new entrants to the job market jumped by 275,000, indicating more Americans are looking for work but struggling to find it. Labor force participation held steady at 62.2%, while the employment-to-population ratio ticked down year over year.
Although job growth continued in health care and social assistance, employment across most major industries — including manufacturing, construction, financial services and tech —showed little to no change. Markets interpreted the data as a clear signal that the labor market is weakening faster than expected.
Trump accuses BLS commissioner of election interference, orders chief fired
President Trump responded swiftly and publicly to the jobs report, posting a scathing message on Truth Social that accused Bureau of Labor Statistics Commissioner Erika McEntarfer — a Biden appointee — of manipulating employment data in the run-up to the 2024 election.
'This is the same Bureau of Labor Statistics that overstated the Jobs Growth in March 2024 by approximately 818,000 and, then again, right before the 2024 Presidential Election,' Trump wrote. 'These were Records — No one can be that wrong?'
He added: 'I have directed my Team to fire this Biden Political Appointee, IMMEDIATELY.'
The post alarmed investors, who viewed the rhetoric as a politicization of U.S. statistical institutions. The removal of a federal official responsible for economic data, based on claims of election-related bias, added to Friday's volatility, especially for rate-sensitive and risk-on assets like crypto.
Trump's nuclear submarine post escalates Russia tensions
Later Friday, Trump again took to Truth Social, this time revealing that he had ordered two U.S. nuclear submarines to reposition in response to recent remarks by Dmitry Medvedev, the former Russian president and current deputy chairman of Russia's Security Council.
'Based on the highly provocative statements of the Former President of Russia… I have ordered two Nuclear Submarines to be positioned in the appropriate regions,' Trump wrote. 'I hope this will not be one of those instances' where words lead to 'unintended consequences.'
The unexpected message — delivered without prior briefing or Pentagon confirmation — sparked concern that diplomatic tensions with Moscow had entered a new phase.
Some viewed Trump's language as deliberate posturing rather than a genuine military threat, aimed at pressuring Russian President Vladimir Putin to consider a ceasefire in Ukraine. However, even if the statement was not intended as a signal of imminent action, it still made the possibility of a U.S.-Russia nuclear confrontation —however unlikely — feel more real. Traders — already reeling from Friday morning's jobs report — respond by dumping risk assets in favor of safer bets like Treasurys and cash.
Fed rate cut expectations rise — but so do U.S. recession fears
Friday's dismal labor data led traders to dramatically increase bets on a rate cut at the Federal Reserve's September FOMC meeting, with many now expecting a 50 basis point reduction. But the prospect of easier monetary policy did little to reassure markets.
That's because rate cuts are no longer viewed as a preemptive move to boost growth — they're now seen as a reaction to economic weakness that may already be unfolding. In this context, monetary easing can be interpreted as confirmation of deteriorating conditions, rather than a bullish catalyst.
For crypto markets, which often mirror tech-sector sentiment, the shift in narrative weighed heavily. Despite the potential for lower real yields, the fear of a looming recession overshadowed any short-term optimism. The result: widespread selling across the digital asset space and renewed caution ahead of key macro events later this month.