Economic data showing strength, combined with a struggling bond market, is casting doubt on the prospect of rate cuts this year, weighing heavily on investor sentiment.
While U.S. stock markets were closed on Thursday in observance of former President Jimmy Carter’s passing, cryptocurrency markets continued to operate, feeling the full brunt of unease ahead of Friday’s December employment report.
By late afternoon, bitcoin (BTC) had fallen to levels not seen in over a month, hovering just above $91,000, marking a 3% drop over the last 24 hours. The broader CoinDesk 20 Index mirrored this decline, with standout losers including solana (SOL) and chainlink (LINK), both down by double digits.
The ongoing crypto selloff follows a strong rally in the fourth quarter of 2024, spurred by Donald Trump’s election win and the anticipation of a more crypto-friendly regulatory environment from Washington. The market had also been buoyed by the U.S. Federal Reserve’s rate cuts, which lowered overnight interest rates by 100 basis points since September. However, a series of unexpectedly strong economic data and inflation reports have quashed hopes for further easing. As a result, yields on long-term interest rates have surged by more than 100 basis points since the Fed started lowering short-term rates.
Today’s decline in the crypto market comes just ahead of the December jobs report. Another round of positive economic data could not only extinguish hopes for rate cuts in 2025 but may lead to the market pricing in potential rate hikes in the months ahead.
So, where could bitcoin’s price go from here?
“BTC, ETH, and SOL are revisiting the lows seen on December 5, and people are starting to face the reality that these levels may not hold,” noted well-known trader Eugene Ng Ah Sio in a post on X. “This is when panic often sets in.”
Ng Ah Sio mentioned that the next support level for bitcoin would be around $85,000 if the $90,000 level fails to hold.
Joe McCann, founder of venture capital firm Asymmetric, suggested that bitcoin could drop as low as $75,000 if it does not maintain the $90,000 threshold.
Trader Skew speculated that the price drop on Thursday might be linked to news about additional bitcoin sales related to the Silk Road case. Analyzing Binance order book data, Skew noted that there is substantial bid liquidity ready to buy bitcoin at lower prices, which appears to outweigh current selling pressure.
“Notably, there’s been a lack of volatility in the market, likely due to the sell flow being relatively modest and the depth of bid liquidity exceeding the selling pressure,” Skew said. “Overall, this doesn’t look too concerning.”
