Bitcoin (BTC) stumbled at the start of the week as robust U.S. jobs data prompted investment banks to reassess Federal Reserve (Fed) rate expectations. The flagship cryptocurrency slipped below $93,000, marking a 1.6% decline, with broader risk assets also trading weak.

Bitcoin Falters Below Key Support Levels

Bitcoin, the largest cryptocurrency by market value, dipped below the $93,000 mark during European trading hours, approaching the critical $92,000 support zone. This level has consistently acted as a safety net since late November. Broader crypto markets mirrored BTC’s decline, with the CoinDesk 20 Index, a measure of the top digital assets, shedding over 3%.
Altcoins like XRP, ADA, and DOGE recorded steeper losses, extending the broader market sell-off.

Jobs Report Sparks Fed Policy Revisions

The U.S. nonfarm payrolls report revealed a surprising 256,000 job additions in December, far surpassing the expected 160,000. The unemployment rate fell to 4.1%, while average hourly earnings rose modestly at 0.3% month-on-month and 3.9% year-on-year.
This strong labor market performance prompted Goldman Sachs to push its anticipated Fed rate cuts to June, with only two cuts now expected in 2025, compared to three initially forecasted.

Bank of America (BofA) went further, suggesting the Fed might even hike rates in response to economic resilience. “The risks for the next move are skewed toward a hike,” BofA analysts noted.

Market Reaction to Fed Tightening Risks

The Fed’s initial rate-cutting cycle began in September 2024, fueling Bitcoin’s impressive 50% rally to record highs above $108,000. However, recent developments hint at a prolonged pause in rate adjustments.
The U.S. 10-year Treasury yield, a barometer of rate expectations, surged 100 basis points since September, reflecting a shift in market sentiment. ING analysts highlighted the rising likelihood of an extended pause, particularly if inflation data continues to hover at 0.3% month-on-month.

CPI Data Could Shift the Narrative

All eyes are now on the U.S. Consumer Price Index (CPI) report due on January 15. Analysts fear base effects could exacerbate headline and core inflation, potentially reinforcing the Fed’s hawkish stance.
A higher-than-expected CPI print could intensify selling pressure across risk assets, including cryptocurrencies, while a softer number might offer temporary relief.