Cryptocurrency Market Faces Uncertainty Amidst Fed Rate Pause Speculation
The new year has brought a tumultuous start for Bitcoin and the broader cryptocurrency market, as investors grapple with the possibility of a prolonged pause in Federal Reserve interest-rate cuts. This uncertainty has led to a decline in digital asset values, with Bitcoin briefly dipping below $90,000 on Monday, representing a 5% drop since the start of 2025.
Economic Resilience and Inflation Concerns Weigh on Crypto
The prospect of a Fed rate pause has been fueled by US economic resilience and concerns over inflationary tariff and immigration policies under the incoming Trump administration. As a result, Treasury yields have surged, cooling the enthusiasm for crypto that was sparked by Trump’s promise to create a friendly regulatory environment for digital assets.
Stock Market Selloff Ripples Across Global Markets
The selloff in Treasuries has had a ripple effect across global markets, with traders dumping stocks and erasing much of the gain triggered by Trump’s election victory. The S&P 500 index, for instance, has seen a significant decline. Higher bond yields and a stronger dollar have put pressure on risk assets, according to Richard Galvin, co-founder of hedge fund DACM.
Crypto Community Remains Optimistic Despite Short-Term Volatility
Despite the current correction, many in the crypto community remain optimistic about the long-term prospects for digital assets under the Trump administration. Bitcoin accumulator MicroStrategy Inc. has continued to buy up the cryptoasset, taking its stockpile to around $41 billion. Technical analysts, however, are warning of a possible test of downside support at $87,500.
Investors Pull Back from Bitcoin ETFs
Over the past four trading days, investors have pulled about $1.6 billion net from US spot-Bitcoin exchange-traded funds, according to data compiled by Bloomberg. This pullback has contributed to the current corrective phase in the cryptocurrency market.
Bitcoin’s Advance Moderates
Bitcoin, which reached a record high of $108,316 last month, has seen its advance since Election Day moderate to roughly 40%. The token changed hands at about $94,800 as of Tuesday morning in London. While the current volatility may be unsettling for some investors, many remain confident in the long-term potential of digital assets.
Leave a Reply