Bitcoin prices fell on Monday as markets reacted in anticipation of Federal Reserve tightening monetary policies.
Bitcoin’s price dropped to $89,800 on Monday. It was the lowest since November mid-November. Bitcoin’s all-time peak of $108,000 was reached almost a month ago, but the currency traded at above $100,000 just last week.
David Duong, Head of Institutional Research at Coinbase, said that while market participants continue to speculate about changes in crypto regulations ahead of Donald Trump’s January 20 inauguration as president-elect and the performance of Bitcoin has been driven by macro factors. Decrypt.
“Given the recent employment data, concerns that the Fed may not deliver any cuts in 2025 are putting pressure on assets across the board,” “He said” “Though if that decision is a product of a stronger economy, that may not last, in our view.”
Duong also added that Duong’s team is “still cautiously optimistic” about Bitcoin’s performance in the first fiscal quarter, but he recognized that “the path is unlikely to be a smooth one."
The new president’s style was that of a “crypto-president” on the campaign trail, promising that regulators would be friendlier to the industry under his leadership. He’s also promised to create a strategic stockpile of Bitcoin that may influence other governments' adoption of Bitcoin.
Still, financial-market participants have grown increasingly doubtful that the Fed will cut rates in the coming months, as labor market readings paint a picture of a strong U.S. economy. On Wednesday, the Bureau of Labor Statistics will release its first inflation snapshot of the year.
Markets fell Friday when the BLS reported that U.S. employers added 256,000 jobs in December Economists expected 160,000 fresh jobs, according to Trading Economics.
“Due to a robust labor market we think that the Fed is no longer cutting rates.” BofA Global Research Senior Economist Aditya Bhave said following Friday’s report, per Opening Bell Daily.
As of this writing, traders penciled in a 30% chance that the Fed holds rates steady through its December meeting, up from 16% a week ago, per CME FedWatch. A month ago, traders foresaw just a 9% chance that the U.S. central bank’s easing campaign had ended.
Lower interest rates tend to be supportive of risk assets like stock and crypto. At the same time, they can contribute to inflation through lower borrowing costs and increased spending.
The Fed’s preferred inflation gauge, core PCE, will be released after policymakers gather later this month. In the meantime, economists expect the Consumer Price Index to show inflation was flat at 2.7% in the 12 months through December, according to Trading Economics.
Rising bond yields have been putting pressure on risk assets amid macro jitters, analysts told Decrypt last week. On Monday, the 10-year treasury yield continued climbing, rising to its highest level since October 2023 at 4.799%, according to TradingView.
Last month, the Fed signaled that it would cut rates at a slower-than-expected pace this year, with policymakers forecasting two rate cuts instead of four. Meanwhile, meeting minutes showed last week that policymakers are focused on shifts in immigration and trade policy under Trump, cautious of how they could contribute to inflation pressures.
Stacy Elliott edited this article.
Editor's note: This story was updated after publication to correct the amount of time since Bitcoin was at a sub-$90,000 price.