Bitcoin Dips Below $90,000 as Fed Rate Cut Doubts Grow

Bitcoin’s price fell to a five-week low on Monday as markets adjusted to the prospect of tighter monetary policy from the Federal Reserve.

The Bitcoin price fell to $89,800 on Monday, falling below $90,000 for the first time since mid-November. And it’s been almost a month since Bitcoin hit an all-time high of $108,000, although it traded above $100,000 last week.

As market players continue to speculate on shifts in crypto regulation ahead of newly elected President Donald Trump’s inauguration on Jan. 20, macro factors have driven Bitcoin’s performance, Coinbase’s head of institutional research, David Duong, said. Declutter.

“Given recent employment data, concerns that the Fed may not make cuts in 2025 are putting pressure on assets across the board,” he said. “But if that decision is a product of a stronger economy, in our view it may not last.”

Duong added that his team is “still cautiously optimistic” about Bitcoin’s performance in the first fiscal quarter, but he acknowledged that “the path is likely not to be smooth.”

The president-elect called himself a “crypto president” during his campaign and promised that regulators under his leadership would be friendlier to the sector. He has also promised to build a strategic stockpile of Bitcoin that could influence Bitcoin adoption by other governments.

Still, participants in the financial markets have increasingly doubted whether the Fed will cut interest rates in the coming months, as labor market data paint a picture of a strong US economy. On Wednesday, the Bureau of Labor Statistics will release its first inflation snapshot of the year.

Markets fell Friday as the BLS reported that U.S. employers added 256,000 jobs in December. Economists had expected 160,000 new jobs, according to figures. Trade economics.

“Given the resilient labor market, we now think the Fed’s austerity cycle is over,” BofA Global Research Senior Economist Aditya Bhave said after Friday’s report. Opening bell daily.

At the time of writing, traders were pricing in a 30% chance that the Fed would hold rates steady at its December meeting, up from 16% a week ago. CME Fed Watch. A month ago, traders expected only a 9% chance that the US central bank’s easing campaign would end.

Lower interest rates tend to support risky assets like stocks and crypto. At the same time, they can contribute to inflation through lower financing costs and higher expenditures.

The Fed’s preferred inflation gauge, the core PCE, will be released later this month after policy makers meet. Meanwhile, economists expect the consumer price index to show inflation remained flat at 2.7% in the 12 months to December. Trade economics.

Rising bond yields are putting pressure on risky assets amid macroeconomic turmoil, analysts said Declutter last week. On Monday, 10-year Treasury yields continued to rise, rising to their highest level since October 2023 at 4.799%. Trading view.

Last month, the Fed signaled it would cut rates more slowly than expected this year, with policymakers predicting two rate cuts instead of four. Meanwhile, minutes from last week’s meeting showed policymakers focused on shifts in immigration and trade policies under Trump, and cautious about how they could contribute to inflationary pressures.

Edited by Stacy Elliott.