The price of Bitcoin fell to a two-month low on Monday, dropping below $90,000 as markets adjusted to the likelihood of tighter monetary policy from the Federal Reserve. The Bitcoin price dipped as low as $89,800, the first time it has fallen below $90,000 since mid-November. This decline follows Bitcoin’s recent all-time high of $108,000 nearly a month ago and a trading period above $100,000 last week.
Bitcoin price hits two-month low as markets react to Fed policies
Market players are speculating on potential shifts in crypto regulation as President-elect Donald Trump prepares for his inauguration on January 20. However, macroeconomic factors have been the primary drivers of Bitcoin’s performance, David Duong told Decrypt, Head of Institutional Research at Coinbase. He stated, “Given the recent employment data, concerns that the Fed may not deliver any cuts in 2025 are putting pressure on assets across the board. Though if that decision is a product of a stronger economy, that may not last, in our view.” Duong noted that his team remains “cautiously optimistic” about Bitcoin’s performance in the first fiscal quarter while acknowledging that “the path is unlikely to be a smooth one.”
Financial market participants are increasingly doubtful that the Federal Reserve will cut rates in the coming months, as strong labor market readings have emerged. On Wednesday, the Bureau of Labor Statistics (BLS) will release its first inflation snapshot of the year. Markets reacted negatively on Friday when the BLS reported that the U.S. added 256,000 jobs in December, surpassing economists’ expectations of 160,000 new jobs.
According to Opening Bell Daily, BofA Global Research Senior Economist Aditya Bhave said, “Given a resilient labor market, we now think the Fed cutting cycle is over,” following the employment report. Traders are now estimating a 30% chance that the Fed will maintain rate levels through its December meeting, up from 16% a week prior, whereas a month ago, there was only a 9% prediction that the easing campaign had concluded.
Lower interest rates generally support risk assets like stocks and cryptocurrencies while contributing to inflation via reduced borrowing costs and increased spending. The Fed’s preferred inflation gauge, the core PCE, is set to be released after the upcoming policymakers’ meeting. Economists expect the Consumer Price Index to show flat inflation at 2.7% in the twelve months leading to December.
Rising bond yields have added pressure to risk assets amid macroeconomic uncertainties. On Monday, the 10-year treasury yield increased to its highest level since October 2023 at 4.799%, according to TradingView. Last month, the Fed indicated it would implement rate cuts at a slower pace than initially expected, with forecasts suggesting only two rate cuts instead of four.
Investors sold off riskier assets, leading to Bitcoin’s decline, which was exacerbated by a significant rise in bond yields. Bitcoin dropped as much as 4.4% to $90,199, marking its lowest price since November 18 and well below its December peak of $108,316. Other cryptocurrencies also experienced losses, with Ether down 6.6% as of 7:50 a.m. in New York.
The stronger-than-expected U.S. jobs data prompted traders to pull back from bets on immediate Federal Reserve interest rate cuts, compounding an already volatile start to 2025. Alex Kuptsikevich, Chief Market Analyst at FxPro, remarked, “The start of the new year has not been easy for the crypto market. Adding to the unease is the fact that last week’s upside momentum failed to develop, only attracting sellers.”
Piotr Matys, a Senior FX Analyst at InTouch Capital Markets, indicated that a head and shoulders chart pattern may have formed for Bitcoin, suggesting a trend reversal from bullish to bearish territory. With $91,600 viewed as a critical support level, breaking below this point signals a “strong technical bearish signal for Bitcoin.” Kuptsikevich predicts that if bearish sentiment prevails, Bitcoin’s next low could approach $88,000, with a potential retreat to around $74,000 also possible.
The previous year marked a record high for Bitcoin, partly fueled by the debut of U.S. exchange-traded funds linked to the cryptocurrency and President-elect Trump’s vocal support for the digital assets sector. However, optimism surrounding Bitcoin has diminished in 2025, with some analysts suggesting traders are awaiting clarity following Trump’s inauguration on January 20.
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