Bitcoin (BTC) kicked off the week in the red, following a strong U.S. jobs report that prompted major investment banks to revise their Fed rate cut expectations. With traditional markets also under strain, the crypto market reacted to shifting monetary policy sentiment.
BTC Dips Below $93,000
Bitcoin, the largest cryptocurrency by market value, slipped below $93,000 during European trading hours, marking a 1.6% decline on the day, according to CoinDesk data. The drop brings BTC closer to the critical $92,000 support level, a key zone that has provided stability since November.
The CoinDesk 20 Index, a broader measure of market performance, fell over 3%. Major altcoins like XRP, ADA, and DOGE recorded steeper losses, highlighting broader weakness across the digital asset space.
Jobs Data Alters Market Dynamics
Friday’s U.S. nonfarm payroll report revealed an unexpected addition of 256,000 jobs in December, significantly surpassing estimates of 160,000. The unemployment rate fell to 4.1% from 4.2%, while average hourly earnings rose modestly by 0.3% month-on-month and 3.9% year-on-year.
The robust labour market data caused Goldman Sachs to delay its anticipated Fed rate cuts, now forecasting reductions in June and December 2025 instead of March, June, and December as previously expected.
“Our economists believe the Fed’s focus has shifted back towards inflation risks,” Goldman’s economic note stated, adding that the jobs data underscores diminished urgency to cut rates.
Bank of America Warns of a Potential Hike
While Goldman and JPMorgan still foresee rate cuts in 2025, Bank of America (BofA) struck a more hawkish tone. The bank suggested the Fed could pause its rate-cutting cycle indefinitely, with risks skewed towards a potential hike.
BofA noted that the 10-year Treasury yield, which reflects interest rate and inflation expectations, has surged by 100 basis points since the Fed initiated its cutting cycle in September.
“We think the cutting cycle is over. The Fed is likely to hold steady, but risks are tilted towards a hike,” BofA analysts commented.
Broader Markets Under Strain
Traditional markets mirrored the crypto downturn, with S&P 500 futures down 0.3% after Friday’s 1.5% decline. Meanwhile, the U.S. dollar index (DXY) neared 110, supported by rising Treasury yields.
The upcoming December Consumer Price Index (CPI) report, due on Jan. 15, could further shape the Fed’s outlook. ING analysts suggested that consistent monthly core inflation increases of 0.3% could reinforce the Fed’s hawkish stance.
BTC’s meteoric rise since the Fed began its rate-cutting cycle in September—surging over 50% to a record high above $108,000—faces its toughest test yet. With market sentiment turning cautious and macroeconomic conditions evolving, Bitcoin traders are keeping a close eye on critical support levels and upcoming inflation data.
