OpinionMarketsBitcoinAltcoins
|8 min ReadWhy Crypto Is Crashing While Rate Cuts Are Back
Lucca Menezes
Senior Analyst
Published
Jan 16, 2026
Alpha Briefing: Crypto has sold off for most of the past two months even as rate-cut odds rebound, equities rip higher, and Tether holds its peg with a large cash cushion. The gap between macro tailwinds and token prices suggests an ugly repositioning where digital assets sit at the very bottom of the global risk stack. Until that forced de-risking is done, good news may keep getting sold.
For seven of the last eight weeks, digital assets have traded like the market’s disposable limb. The space managed a quick bounce around Thanksgiving, then got slammed again as Japanese markets reopened, with the Nikkei under pressure and JPY yields pushing higher. That pattern matters. It tells you crypto is now tightly wired into global macro, yet still treated as the first thing to sell when anything feels off.
What makes this leg lower so uncomfortable is the backdrop. Core PPI has slipped to 2.6 percent, below expectations. Labor data after the US government shutdown points to a cooling economy. December rate-cut odds, which had collapsed from near-certainty to roughly a third, have jumped back toward a strong probability. Equities noticed and ripped into month-end. Crypto did not. It bled into strength.
When the macro tape is supportive, the Fed path looks friendlier, and the White House is openly signaling a dovish pick like Kevin Hassett for the next Fed chair, yet tokens cannot catch a bid, you are not in a normal correction. You are in a structural repositioning where whole segments of the investor base are being forced to shrink their crypto footprint, whether they like it or not.
A Squeezed Risk Stack, From Freddie And Fannie To Memecoins
One clue is hiding in plain sight: Bill Ackman complaining that his Freddie Mac and Fannie Mae trades are trading like proxy altcoins. On fundamentals that is nonsense. On flow dynamics it is exactly right.
The wall between TradFi, crypto, and retail is gone. Multi-asset hedge funds, RIAs, family offices, and even some corporates now run everything in a single risk book. When VAR blows out, they do not argue theology about blockchains. They raise cash. And the stuff they understand least, trust least, or can dump fastest goes first.
That is why the selling feels “invisible” from inside the industry. On-chain flows, exchange balances, and derivatives open interest do not tell you what a multi-strategy pod is doing in its omnibus account at a prime broker. Those decisions show up as a persistent offer across BTC, L1s, DeFi and high-beta garbage, not as one big panic print.
The irony is that crypto spent a decade begging to be taken seriously by traditional capital. Now that it has succeeded, it is learning what it means to live inside someone else’s risk hierarchy. At the bottom.
When Social-Value Tokens Sink And “Real Yield” Fails To Save You
The article’s core framework is useful. Tokens get their worth from three pillars: financial value, utility value, and social value. Most of this market is still overwhelmingly social. Memes, identity, community, narrative. That is the softest pillar, and when sentiment hits the floor, it shatters first.
With fear gauges near extremes, it is no surprise that the most narrative-driven assets are getting smoked. Bitcoin as digital banner, L1 ecosystems, NFTs, memecoins. These are instruments whose price is the market’s confidence level expressed in ticker form. In a confidence shock, they will overshoot to the downside.
More interesting is what is not working. In theory, tokens tied to durable cash flows or hard usage should outperform. Some, like exchange tokens, have held up better. Many others, including a wide range of DeFi names and so-called “cash-flow machines,” have not. A beautiful yield chart does not help if the marginal buyer has decided to stop adding risk units of any kind.
Part of the problem is that “financial value” in crypto is still pro-cyclical. Fees, volumes, and protocol earnings ballooned in prior manias and are now normalizing. Utility is still thin outside a few verticals. Social value, meanwhile, is suffering from fatigue after years of rotating from ICOs to DeFi to NFTs to memes. The market has not yet found the next story it is willing to pay up for.
In that environment, even thoughtful defenses of L1 valuations from venture firms and research shops read more like morale support than catalysts. The long-run thesis that “most of the world’s assets will eventually sit on blockchains” is probably right. It does not tell you who has to puke their SOL, AVAX or newer L1 exposure this week to meet redemptions.
Tether’s Junk Rating, Cash Pile And What It Really Signals
Tether is again playing its familiar role as the lightning rod for market anxiety. S&P has tagged USDT with a junk rating while the latest attestation shows roughly 70 percent of backing in cash and equivalents and 30 percent in gold, bitcoin, loans, plus an equity buffer from the parent.
On paper, that structure is exactly what you would expect from a private issuer with broad flexibility in its asset mix. Liquidity risk only truly appears if redemptions approach that 70 percent cash-equivalent line in a short window, which is not a realistic scenario in a functioning market. Solvency risk would require simultaneous large losses across BTC, gold and loan books that swallow the parent’s earnings power. That is a high bar.
The peg behavior tells you as much. USDT has not meaningfully depegged, even as critics resurrect the same old talking points and S&P’s report ricochets around X. Tether’s problem is reputational and political, not mechanical. The market has decided that any deviation from a “Treasuries and bills only” portfolio is suspicious, even if the issuer could earn billions annually just by harvesting government coupons.
For traders, the key point is not whether USDT is actually in trouble. It is that Tether headlines are now a recurring volatility switch. Each downgrade, attestation, or CEO thread gives macro and multi-strategy players a fresh excuse to sell peripheral assets, trim leverage, or rotate into cleaner venues. That feedback loop keeps risk appetite suppressed even when the plumbing is still working.
What This Means For The Next Leg Of The Cycle
So where does this leave the market that “should” be rallying on better macro but is not?
First, this looks less like a simple drawdown and more like a repricing of crypto’s position inside global portfolios. For a decade, investors could treat digital assets as an isolated sandbox. Today it competes directly with equities, credit trades, basis arb, and yield strategies inside the same risk bucket. Until that competition settles into a new equilibrium, every macro wobble will push allocators to test how low they can run their token exposure without career risk.
Second, the industry’s transparency is both a blessing and a curse. On-chain metrics, funding data, and ETF flows give an almost obsessive view of “crypto native” behavior. What they do not show is the black-box de-risking happening in banks, hedge funds, and global macro shops. The selling that nobody can explain may simply be the selling nobody inside crypto is allowed to see.
Third, this environment is quietly separating narratives with genuine long-term conviction from those that only worked in one liquidity regime. The idea that base layers are long-dated options on all future tokenized assets is defensible. The idea that every branded yield token, governance coin, or meme ticker deserves a premium because “number go up every cycle” is not. This is the kind of tape that forces that distinction.
For traders, the playbook is uncomfortable but clear. Respect that crypto now trades inside the global risk machine, not outside it. Assume that structurally higher participation from macro funds means sharper drawdowns when the machine needs cash. Focus on assets where financial and utility value can survive a multi-quarter sentiment winter, not just the next reflexive bounce.
The selling may look irrational from the inside. From the outside, it looks like the market finally repricing crypto’s true position in the global risk spectrum. At the moment, that position is at the bottom.
Disclaimer: This document is intended for informational and entertainment purposes only. The views expressed in this document are not, and should not be taken as, investment advice or recommendations. Recipients should do their own due diligence, taking into account their specific financial circumstances, investment objectives and risk tolerance, which are not considered here, before investing. This document is not an offer, or the solicitation of an offer, to buy or sell any of the assets mentioned.