U.S. economic data and a rising bond market have raised concerns about the potential for rate cuts this year, which has sent shockwaves through the cryptocurrency market.
While the U.S. stock markets were closed Thursday to honor the late President Jimmy Carter, crypto markets remained open and absorbed the full impact of heightened uncertainty ahead of Friday’s highly anticipated December employment report.
By late afternoon, Bitcoin (BTC) had retreated to $91,000, marking a 3% drop in the last 24 hours and dropping to levels unseen in over a month. The broader CoinDesk 20 Index followed suit, with notable underperformers such as Solana (SOL) and Chainlink (LINK) both seeing double-digit declines.
This ongoing selloff comes after a strong rally in the fourth quarter of 2024, which was fueled by optimism surrounding Donald Trump’s victory and the anticipation of a more crypto-friendly regulatory environment. Bitcoin had also been buoyed by the U.S. Federal Reserve’s decision to lower interest rates in recent months. However, stronger-than-expected economic data has pushed bond yields higher, dampening enthusiasm for riskier assets like cryptocurrencies.
Crypto assets, which tend to perform better in environments with lower interest rates, are now facing headwinds as higher bond yields make safer investments more appealing. The recent rise in long-term bond yields has prompted concerns that the Federal Reserve may delay or abandon any future rate cuts. Some traders are even beginning to price in the possibility of rate hikes in the near term.
Where does Bitcoin go from here?
“Bitcoin, Ethereum, and Solana are revisiting their December 5 lows, and many are starting to think these support levels won’t hold,” trader Eugene Ng Ah Sio remarked on X. “This is typically when panic starts to set in among traders.”
Ng Ah Sio pointed out that the next support level for Bitcoin is around $85,000 if it fails to hold above $90,000.
Joe McCann, the founder of Asymmetric, suggested that if Bitcoin can’t hold at $90,000, it could target $75,000 as the next downside level.
Traders are also speculating about the impact of news related to Silk Road Bitcoin sales, which may be contributing to the price drop. Skew, a prominent trader, observed that while selling pressure is present, the amount of liquidity to buy Bitcoin at lower prices is strong, suggesting that the market may not be in freefall.
“Despite the selling pressure, there’s been little volatility behind the move, which signals that bid liquidity is outweighing the selling interest,” Skew said, suggesting that the market may not be as vulnerable as it might initially appear.
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