Bitcoin and the broader cryptocurrency market have had a tumultuous start to the year, impacted by speculation that the United States Federal Reserve’s (Fed) opportunity for further interest rate cuts may be diminishing.
On Monday, the digital asset briefly fell below $90,000—a nearly 5% decline from the beginning of 2025—before a recovery left its January performance largely unchanged. Smaller cryptocurrencies, including Ether, are also experiencing losses this month.
Investors are gravitating toward the likelihood of a prolonged pause in Fed rate changes, fueled by the resilience of the US economy and concerns over inflationary policies related to tariffs and immigration from President-elect Donald Trump, who is set to take office next week.
As a result, Treasury yields have surged, dampening some of the enthusiasm for cryptocurrencies that was ignited by Trump’s promise to position the US as the global hub for digital assets through favorable regulations and reversing a crackdown from the Biden administration.
The selloff in Treasuries also affected stock markets, leading to a decline in equities. For example, the S&P 500 index has lost much of the gains it saw following Trump’s election victory on November 5.
“Material pressure” is being placed on risk assets due to higher bond yields and a stronger dollar, noted Richard Galvin, co-founder of the hedge fund DACM. He added that “Trump may prioritize crypto-related executive orders among his first actions after inauguration.”
Bitcoin, which hit an all-time high of $108,316 last month, was trading at approximately $94,800 as of 6 AM on Tuesday in London. Its price increase since Election Day has slowed to about 40%.
Despite the current challenges, many in the crypto community remain optimistic about a sustained boom under Trump. MicroStrategy Incorporated, a major Bitcoin buyer, has just reported its 10th consecutive weekly acquisition of the cryptocurrency, bringing its total holdings to around $41 billion.
At this point, according to Fairlead Strategies LLC technical analyst Katie Stockton, the largest digital asset is in a “corrective phase.” Chart analysis suggests it may test “downside” support at $87,500. Over the last four trading days, investors have withdrawn about $1.6 billion net from US spot Bitcoin exchange-traded funds, according to data compiled by Bloomberg.