tl;dr
The price of Bitcoin briefly dipped below $93,000, facing pressure due to inflation concerns sparked by macroeconomic data. Traditional assets' strong performance has affected the crypto market, with the Fed signaling a cautious approach to easing financial conditions. Data from the Institute for Su...
The price of Bitcoin briefly dipped below $93,000, facing pressure due to inflation concerns sparked by macroeconomic data. Traditional assets' strong performance has affected the crypto market, with the Fed signaling a cautious approach to easing financial conditions. Data from the Institute for Supply Management and the U.S. Bureau of Labor Statistics reflect a strong economy. Bitcoin's price rebounded to $94,600 after the dip, showing a 2.2% drop over the past day. Ethereum and Solana also experienced price decreases. Concerns over the incoming administration's policy moves and inflation have impacted the market, with the U.S. Dollar Index and treasury yields drawing closer to their highs. Inflation worries and higher bond yields are contributing to crypto selling off. Financial-market participants await the BLS's upcoming employment snapshot.
The price of Bitcoin briefly dipped below $93,000 earlier Wednesday, facing pressure after a series of macroeconomic data points sparked inflation jitters among investors. Jake Ostrovskis, an OTC trader at Wintermute, told Decrypt that crypto prices have been tightly correlated with traditional assets since the Fed’s December FOMC meeting, in which policymakers signaled a more cautious approach to easing financial conditions in 2025. Traditional assets have been pricing out Fed rate cuts amid signs that the U.S. economy remains strong, and that’s had a pronounced effect on the crypto market as inflows spurred on by a wave of post-election hype cool down, he said.
The Institute for Supply Management, for example, released its Purchasing Manager’s Index for the services sector Tuesday. The gauge used to measure industry-specific economic activity came in higher than expected, according to Trading Economics. “Two months ago, no one would even look at this,” Ostrovskis said. “But because the Fed has put onus on inflation data now, investors and traders are looking at every single bit.” Data released by the U.S. Bureau of Labor Statistics meanwhile showed the economy remained on “very strong footing” in November, Pantera Capital General Partner Cosmo Jiang told Decrypt. The report showed an unexpected increase in job openings, and “all markets, from equities to rates to crypto, started to price in a ‘higher for longer scenario,’” he added.
The Fed lowered its benchmark interest rate by 1% last year, cutting interest rates in September for the first time in four years. While lower interest rates tend to support risk assets, they can also stimulate inflation through increased spending and easier borrowing. Following Wednesday’s dip, the price of Bitcoin has since rebounded to $94,600, showing a 2.2% drop over the past day. Meanwhile, the price of Ethereum and Solana had fallen 3.4% to $3,300 and 4.6% to $195, respectively. 10x Research wrote in a Wednesday note that a “less aggressive-rate cut trajectory,” which sent Bitcoin tumbling from an all-time high price of $108,000 in December, has been partly motivated by concerns surrounding the incoming administration and its ability to overstimulate the economy through new policy moves.
On Monday, Bitcoin’s price topped $100,000, crossing the psychological mark for the first time in weeks as President-elect Donald Trump’s team reportedly weighed a paired-back tariff plan. Speaking with Bloomberg on Tuesday, Goldman Sachs Chief Economist Jan Hatzius said that inflation would cool faster if Trump did not implement “universal tariffs,” as the president-elect has promised. The U.S. Dollar Index (DXY), which measures shifts in the dollar's value relative to a basket of other currencies, fell Monday to 108. Since inflation worries have reemerged, however, the index has drawn closer to a two-year high of 113, according to TradingView.
The 10-year treasury yield, which rose to 4.681% Wednesday, was close to its highest level in eight months, according to TradingView. Wintermute’s Ostrovskis said that as inflation looks like it’s going to run hot again, higher bond yields are indeed weighing on the crypto prices. “As yield goes higher, the incentive to put money in risk assets like crypto becomes lower, and therefore you get crypto selling off,” he explained. As inflation concerns come into focus, financial-market participants will get a fresh look at the state of the labor market Friday. The BLS is set to release its monthly employment snapshot, with the unemployment rate expected to tick up to 4.2% in December, according to Trading Economics.