Bitcoin (BTC) started the new week on a negative note as major investment banks reassessed their expectations for Federal Reserve (Fed) rate cuts following Friday’s strong jobs report.
The leading cryptocurrency by market value fell below $93,000 during European time, representing a 1.6% drop on the day, according to data source CoinDesk. It looked like prices would test the support zone near $92,000, which has consistently acted as a floor since late November.
The CoinDesk 20 index, a broader market gauge, was down more than 3%, with major coins such as XRP, ADA, and DOGE posting further losses.
In traditional markets, futures linked to the S&P 500 traded 0.3% lower, pointing to an extension of Friday’s 1.5% decline that took the index to its lowest level since early November. . The dollar index (DXY) approached 110 for the first time since late 2022, with elevated Treasury yields supporting further gains.
Data released Friday showed nonfarm payrolls rose by 256,000 in December, the most since March, beating expectations of 160,000 jobs added and the previous figure of 212,000 by a wide margin. The unemployment rate decreased from 4.2% to 4.1%, and the average hourly wage was slightly lower than expected, at 0.3% month-on-month and 3.9% year-on-year.
That led Goldman Sachs to postpone the next interest rate cut to June from March.
“Our economists now expect the Fed to cut just twice in 2025 (June/December versus March/June/December previously), with another rate cut in June 2026, Goldman Economic Research’s note to its clients said. January 10.
“If the December FOMC decision marked a significant shift toward inflation in the Federal Reserve’s relative risk weighting, the December jobs report may have completed the pendulum swing. The weak average hourly earnings figure prevented that the print sent a more alarming signal of overheating but the arguments in favor of cuts to mitigate the risks for the labor market have taken a back seat,” the note explains.
The Federal Reserve’s rate-cutting cycle began in September when the official reduced the benchmark borrowing cost by 50 basis points. The bank made quarter-point rate cuts in the following months before pausing in December to signal fewer rate cuts in 2025. BTC is up more than 50% since the first rate cut on September 18, reaching all-time highs above $108,000 at one point.
While Goldman and JPMorgan still expect rate cuts, Bank of America (BofA) fears a prolonged pause, with risks skewed in favor of a rate hike or a further adjustment. Note that the 10-year US Treasury yield, which is sensitive to interest rate, growth and inflation expectations, has already risen 100 basis points since the September 18 rate cut.
“We believe the cutting cycle is over… Our base case has the Fed in a long stance. But we think the risks to the next move are skewed toward an increase,” BofA analysts said in a note, according to Reuters .
ING said: “The market is right to see the risk of a prolonged pause by the Federal Reserve” in light of recent economic reports.
“That view will only increase if core inflation hits 0.3% monthly for the fifth month in a row next week,” ING said in a note to clients over the weekend.
The December consumer price index report is scheduled to be released on January 15. Some observers worry that base effects could accelerate the headline CPI and core CPI, which would add to the Fed’s hawkish narrative.
