Bitcoin (BTC) started the new week on a negative note as major investment banks reassessed their expectations for a Federal Reserve (Fed) rate cut following Friday’s strong jobs report .
The leading cryptocurrency by market value fell below $93,000 during European hours, representing a 1.6% drop on the day, according to data source CoinDesk. Prices appeared poised to test the support zone near $92,000, which has consistently acted as a floor since late November.
The CoinDesk 20 Index, a broader market indicator, fell more than 3%, with major coins like XRP, ADA and DOGE posting larger losses.
In traditional markets, futures linked to the S&P 500 traded 0.3% lower, indicating an extension of Friday’s 1.5% decline that pushed the index to its lowest level since beginning november. The dollar index (DXY) approached 110 for the first time since late 2022, with high Treasury yields supporting further gains.
Data released Friday showed nonfarm payrolls rose by 256,000 in December, the biggest increase since March, well above expectations of 160,000 job gains and the previous figure of 212,000. The unemployment rate fell to 4.1% from 4.2%, and the average hourly wage was slightly lower than forecast at 0.3% month-on-month and 3.9% year-over-year.
This prompted Goldman Sachs to push the next interest rate cut to June rather than March.
“Our economists now expect the Fed to cut rates only twice in 2025 (June/December versus March/June/December previously), with another rate cut in June 2026, says the Goldman Economic note Research addressed to its clients on January 10.
“If the December FOMC decision marked a significant swing back toward inflation in the Fed’s relative risk weighting, the December jobs report could have completed the pendulum swing. The weakness in average hourly wages has prevented the report from sending a more alarming warming signal, but the arguments for budget cuts to mitigate labor market risks took a back seat,” the note explains.
The Fed’s rate-cutting cycle began in September when the official cut the benchmark borrowing cost by 50 basis points. The bank cut rates by a quarter point in the following months before pausing in December to signal fewer rate cuts in 2025. BTC has surged more than 50% since the first rate cut on September 18, hitting record 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 tilted towards a rate hike or further tightening. It’s worth noting that the 10-year U.S. Treasury yield, which is sensitive to interest rate, growth and inflation expectations, has already jumped 100 basis points since the rate cut. September 18.
“We believe the interest rate cut cycle is over… Our base case scenario calls for a prolonged Fed suspension. But we think the risks to the next move are tilted toward an increase,” the Fed said. BofA analysts in a note, according to Reuters.
ING said: “The market is right to see the risk of a prolonged Fed pause” in light of recent economic reports.
“This view will only increase if core inflation reaches 0.3% month-on-month for a fifth consecutive month 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 will accelerate headline and core CPI, reinforcing the Fed’s hawkish narrative.
