Bitcoin Falls Below $90,000 as Fed Policy Signals Shake Markets and Crypto Investors

Bitcoin's recent dip below $90,000 has raised concerns among investors. The cryptocurrency fell to $89,800 on Monday after hitting an all-time high of $108,000 nearly a month ago. This decline coincides with market jitters driven by strong U.S. economic data and skepticism about potential interest rate cuts by the Federal Reserve.

The U.S. Bureau of Labor Statistics reported 256,000 new jobs in December, surpassing the forecasted 160,000. Aditya Bhave of Bank of America Global Research said , "Given a resilient labor market, we now think the Fed cutting cycle is over," suggesting that further rate cuts are unlikely in the short term. Rising bond yields have added to investor concerns, with the 10-year Treasury yield reaching 4.799% on Monday, its highest since October 2023.

David Duong, Coinbase’s Head of Institutional Research, remains cautiously optimistic about Bitcoin’s performance in the first quarter of 2025. He noted that the market is under pressure due to concerns about the Fed’s stance but believes the outlook could improve if the economy stabilizes. Despite recent sell-offs, Bitcoin has maintained a support level near $90,000, a critical psychological threshold for investors.

Ethereum, the second-largest cryptocurrency by market capitalization, also experienced a downturn, dropping below $3,000—a 20% decline from the previous month. CryptoQuant contributor Percival highlighted that Bitcoin’s open interest on the Chicago Mercantile Exchange (CME) dropped by 13%, reflecting decreased institutional activity. Monthly inflows into Bitcoin ETFs fell from $14 billion to $6.6 billion, signaling a shift in market sentiment.

The upcoming release of the Consumer Price Index (CPI) and the Fed’s Beige Book will be crucial in determining future market movements. Analysts, including BRN’s Valentin Fournier, are closely watching these reports for signs of inflation trends and the central bank’s policy direction. Fournier noted , "A higher-than-expected CPI reading could further solidify expectations of a more hawkish Fed stance, potentially putting more downward pressure on crypto prices."

President-elect Donald Trump’s inauguration on Jan. 20 has fueled speculation about a more crypto-friendly regulatory environment. Trump has promised to create a strategic Bitcoin stockpile, but analysts remain cautious about the immediate impact of his policies.

Bitcoin’s recent price drop was mirrored by a broader downturn in tech stocks, with companies like Nvidia and Palantir experiencing declines on Monday. As of Tuesday morning, Bitcoin had recovered slightly to $95,000, while Ethereum remained down by 5% at $3,161.

Despite these fluctuations, Bitcoin’s Short-Term Holder Market Value to Realized Value (STH MVRV) indicator shows stability, suggesting that short-term investors are not facing significant losses. Percival warned of potential risks but noted that current demand levels, with $12 billion in on-chain volume, indicate ongoing market interest.