Bitcoin Under Strain as Goldman Lowers Fed Rate Cut Hopes, BofA Warns of Possible Rate Hike After Surging Jobs Data.

Risk assets are experiencing significant pressure as investment banks reassess their projections for Federal Reserve rate cuts following the unexpectedly strong U.S. jobs report from Friday.

Bitcoin (BTC) began the week on a negative note, dipping below $93,000 during European trading hours, reflecting a 1.6% decrease for the day, according to CoinDesk data. The cryptocurrency is now nearing its support level around $92,000, which has held steady since late November.

The broader cryptocurrency market also faced declines, with the CoinDesk 20 Index down over 3%. Major altcoins like XRP, ADA, and DOGE saw even larger percentage losses.

In traditional markets, S&P 500 futures were down 0.3%, extending Friday’s 1.5% drop that brought the index to its lowest point since early November. The dollar index (DXY) surged towards 110, marking its highest level since late 2022, as Treasury yields continued to rise.

The December jobs report, released on Friday, showed nonfarm payrolls increased by 256,000, well above the expected 160,000. The unemployment rate also dropped to 4.1%, while average hourly earnings grew at a more moderate pace of 0.3% month-on-month and 3.9% year-on-year.

The strong employment data led Goldman Sachs to revise its outlook, pushing back its forecast for interest rate cuts to June and December 2025, compared to the previous expectation for cuts in March. Goldman stated that the data lessened the urgency for rate cuts, as inflationary concerns now seemed less pressing.

The Fed began its rate-cutting cycle in September, first reducing rates by 50 basis points, followed by additional quarter-point cuts. It paused in December, signaling fewer rate cuts in 2025. Since then, Bitcoin has risen over 50%, reaching highs above $108,000.

While Goldman Sachs and JPMorgan still anticipate rate cuts, Bank of America (BofA) expressed concerns about an extended pause or even the possibility of a rate hike. The yield on the 10-year Treasury note has already increased by 100 basis points since September, reflecting growing concerns over inflation and economic growth.

ING analysts also warned that the risk of the Fed maintaining an extended pause, or even tightening, is rising. This sentiment will likely grow stronger if core inflation continues to remain high, especially with the release of the upcoming consumer price index (CPI) report.

The December CPI report, due for release on January 15, will be closely watched, with concerns that base effects could push inflation figures higher, reinforcing the hawkish stance of the Fed.