Bitcoin took a hit on Monday, dipping below the crucial $93,000 support level as expectations of a hawkish Federal Reserve ramped up in the wake of Friday’s blowout jobs report. The risk-off sentiment spread across crypto markets, with altcoins and DeFi tokens leading the losses.
Bitcoin Sinks as Rate Cut Hopes Fade
The world’s largest cryptocurrency fell as much as 1.6%, breaching support at $93,000 and threatening a deeper pullback to the $92,000 zone that has held steady since late last year. The moves came as risk assets broadly retreated and the US dollar surged to 3-month highs.
Driving the shift in market sentiment were reduced expectations for Federal Reserve rate cuts this year after US nonfarm payrolls smashed forecasts by rising 256,000 in December. That marked the biggest gain since March and easily beat estimates of 160,000.
If December’s FOMC decision marked a significant shift back towards inflation in the Fed’s relative weighting of risks, the December jobs report may have completed the pendulum swing.
– Goldman Sachs Economic Research note, Jan. 10
Wall Street Pares Back Rate Cut Bets
The blockbuster jobs data prompted major Wall Street banks to scale back their forecasts for Fed rate cuts:
- Goldman Sachs pushed out its next rate cut call to June from March, now expecting only two 25bps cuts in 2025
- Bank of America warned an extended Fed pause was likely, with risks tilted towards a hike
The Fed had delivered its first rate cut in over 3 years in September, spurring a >50% Bitcoin rally to record highs above $108,000. But the resilient jobs market and still-elevated inflation have called into question the central bank’s ability to sustain an easing cycle.
Eyes on CPI as Base Effects Loom
Market focus now turns to the December CPI report due Thursday, where base effects could drive a reacceleration in inflation. ING warned the headline CPI figure could print 0.3% MoM for a fifth straight month, adding to the hawkish Fed narrative.
An upside inflation surprise would likely cement the case for an extended Fed pause or potential rate hike, dealing a further blow to risk assets like Bitcoin. On the other hand, any downside miss could revive hopes of a Fed pivot and spark a relief rally.
Bitcoin Technical Outlook Weakens
For Bitcoin, the breach of $93,000 support turns attention to the next key level at $92,000. A sustained breakdown there would open the door for a retest of the 200-day moving average, currently near $87,500.
The 14-day RSI has fallen back below 50 into bearish territory, while the daily MACD histogram is on the cusp of a bearish crossover below the zero line. Such signals point to waning bullish momentum that could precede further downside.
A close below $92K would negate the multi-month uptrend and shift the bias firmly to the downside. Bitcoin needs to claw back above $95K to alleviate the pressure and avert a deeper pullback.
– @CryptoHornHairs, Bitcoin Trader & Analyst
In summary, the hawkish repricing of Fed expectations has taken the wind out of Bitcoin’s sails, forcing BTC to relinquish key support. With the technical outlook weakening, bulls will be hard-pressed to stage an immediate recovery. The pain trade may just be getting started.
