Bitcoin experienced another decline at the start of the week, driven by strong U.S. employment data showing 256,000 jobs added in December, exceeding expectations. This bolstered predictions that the Federal Reserve might take a more cautious approach to interest rate cuts in 2025, heightening investor concerns about liquidity and the impact of higher interest rates on the cryptocurrency market.
With rising interest rates, the dollar strengthens, and liquidity in financial markets decreases, putting direct pressure on cryptocurrencies, including Bitcoin. Sustained high Treasury yields further weaken investor sentiment, with analysts suggesting that this trend could push Bitcoin prices lower, potentially reaching $90,000 if current conditions persist.
Alternative cryptocurrencies have also been impacted by Bitcoin’s performance. Ether fell by 1.6%, Cardano dropped by 6.2%, while XRP rose by 3.8%, reflecting the volatile nature of the current market.
As for the U.S. dollar, it saw significant gains early in the week, climbing to its highest level in over two years at 109.98. This rally was supported by the U.S. jobs report, which also showed the unemployment rate dropping to 4.1%. These data reinforced the Federal Reserve’s conservative stance on monetary policy, negatively affecting major currencies, which hit new lows.
With Fed rate cut expectations reduced to just 27 basis points this year, investors now eagerly await U.S. inflation data due on Wednesday. Any upward surprise in inflation could completely rule out further rate cuts. Meanwhile, major currencies remain under pressure from the strong dollar, with the Australian dollar dropping to its lowest since April 2020, and the New Zealand dollar nearing its weakest level in over two years.
