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Bitcoin continued its downward trajectory on Wednesday, erasing the entirety of its recent rebound as concerns over slower-than-expected interest rate cuts in 2025 rattled risk-driven assets.
After briefly surpassing the $100,000 mark during a recovery from a late-December slump, the world’s largest cryptocurrency saw sharp losses on Tuesday and Wednesday. By 00:49 ET (05:49 GMT), Bitcoin was down 0.3% at $96,607.7, following a steep 5% decline in the previous session.
The sell-off comes after Bitcoin’s stellar performance in 2024, fueled in part by optimism over Donald Trump’s presidential victory and his promise to implement crypto-friendly policies. However, profit-taking and uncertainty surrounding Trump’s upcoming policy announcements, as he assumes office on January 20, have added to the pressure on the crypto market.
Rate Hikes Weigh on Bitcoin
Bitcoin’s losses mirrored broader declines in risk assets as stronger-than-expected U.S. economic data renewed concerns about a slower pace of Federal Reserve interest rate cuts in 2025.
November’s job openings exceeded expectations, and purchasing managers’ index data for December highlighted a resilient U.S. economy, raising fears that inflation may remain stubbornly high. This has reinforced the Fed’s cautious stance on rate cuts, as indicated during its December meeting.
Fed officials reiterated earlier this week that they expect to maintain higher interest rates for longer, limiting liquidity in speculative markets such as cryptocurrency. This dynamic, which had weighed heavily on crypto markets through 2022 and much of 2023, appears to be resurfacing.
Altcoins Follow Bitcoin Lower
The broader cryptocurrency market mirrored Bitcoin’s losses, erasing gains from the past week. Altcoins faced sharper declines, with Ether, the second-largest cryptocurrency, plunging 8.4% to $3,360.35. XRP, the third-largest crypto, dropped 5.1% to $2.3084.
Analysts at Compass Point Research predicted that Ether might outperform Bitcoin this year, as anticipated regulatory clarity in the U.S. encourages diversification beyond Bitcoin.
Other major altcoins, including Solana, Cardano, and Polygon, tumbled between 8% and 12%. Meanwhile, meme tokens were not spared, with Dogecoin sliding 11%.
The market now turns its attention to upcoming U.S. nonfarm payroll data for December, which could provide further clues on the labor market and its impact on the Fed’s policy trajectory. With uncertainties looming, crypto investors remain cautious amid renewed pressure on the sector.
