Cryptocurrency market stumbles amid fed rate concerns

Bitcoin and the rest of the cryptocurrency market had a rough start to the year as fears rose that the Federal Reserve might be nearing its last interest rate cut.

According to Bloomberg’s report , on Monday, Bitcoin briefly dipped below $90,000. Its biggest fall since January 1, down nearly 5% for the month ahead of Monday’s recovery. Other cryptocurrencies, such as Ether, are also still suffering to make gains for the month.

The report revealed that the crypto meltdown is a result of uncertainty around the Federal Reserve policy changes. Investors believe that the Fed is closing its window for further interest rate cuts. In the last Federal Open Market Committee (FOMC) meeting, Jerome Powel, the chair of the Federal Reserve, announced that the U.S. central bank will adopt a more hawkish stance moving forward following increased risks of a possible rise in inflation.

Barchart, a financial markets trading and investing tool provider, reported that there is a less than 5% chance that the Fed will cut rates this month and a 95% chance of maintaining the current rate range of 4.25%- 4.5%. Fewer rate cuts mean reduced liquidity and investor appetite for risk assets such as digital assets.

The excitement about crypto is still there despite soaring treasury yields

Investors are wagering on the possibility of a longer break before any federal reserve rate changes, stimulated by a robust U.S. economy and bullish monetary policy coming from the cabinet of U.S. President-Elect Donald Trump. While soaring Treasury yields have dampened some of the enthusiasm around digital currencies, many people in the space are still optimistic. 

This is primarily due to President-elect Donald Trump’s recent involvement in the digital asset space and his pledges, including establishing a Bitcoin reserve for the U.S. Treasury and making the U.S. a crypto-friendly country. Trump also promised to reverse the anti-crypto regulations enforced by the Biden-Harris administration.

Trump, whose inauguration is scheduled for January 20th, has caused increased tension and economic uncertainty following his proposed policies on taxes, immigration, and tariffs. Powell explained in the last meeting that the committee was working on figuring out the potential implications of Trump’s policies and how tariffs will affect inflation in the country.

The sudden uncertainty has also trickled down to stock market investors across global markets. The S&P 500 index has been on a steep decline, erasing almost all gains witnessed after Trump’s victory in the U.S. presidential elections held on November 5th. According to a note by Charlie Morris, ByteTree Asset Management’s Chief Investment Officer, major financial markets are “richly priced.” Morris also highlighted that the tech sector could begin a pullback soon.

Investors remain optimistic as Bitcoin falls below $95K

According to data from the crypto price tracking website CoinGecko, the world’s largest digital asset is currently trading at $94,822, a 12.3% decline from its all-time high of $108,135, recorded on December 17th last year. The digital asset is down 6.8% in the previous seven days but has appreciated by 1.5% in the last 24 hours.

Despite the macro headwinds early in the year, experts such as CoinMarketCap’s Research Lead Alice Liu believe 2025 will be the year Bitcoin goes mainstream. In an interview with Scot Melker, Liu predicted that the crypto market would boom again after Trump’s inauguration. 

Many crypto-savvy investors are also hopeful about crypto’s performance in 2025. Tech giant and Bitcoin accumulator Microstrategy Inc. announced on Monday its 10th consecutive weekly Bitcoin purchase despite the crypto selloff. The software company purchased roughly 2,530 bitcoins last week for $243 million. According to Bitcoin Treasuries , the purchase brought Microstrategy’s Bitcoin holdings to 450,000 Bitcoin valued at $42.74 billion at current prices. 

A technical analyst from Fairlead Strategies LLC, Katie Stockton, said that for now, Bitcoin is in a corrective phase. She explained that the current chart trends give a high likelihood of a test towards a “downside” support at $87,500.

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