Isabella García
Bitcoin’s value dropped 5% to $96,527 on Wednesday afternoon in Asia, after briefly surpassing the $100,000 milestone earlier in the week, according to data from PRIME’s bitcoin price page. Ether faced an even steeper fall, plummeting 8.5% in the past 24 hours to $3,353. Other major cryptocurrencies, including Dogecoin and Avalanche, saw losses exceeding 10% within the same time frame. PRIME’s GMCI 30 index, which tracks the top 30 cryptocurrencies, registered a decline of 7.48%.
Earlier this week, the cryptocurrency market showed strong momentum as both bitcoin and ether surged, fueled by heightened market optimism around Donald Trump’s imminent presidential inauguration. Analysts pointed to rising perpetual futures funding rates as a key indicator of the bullish sentiment.
However, Min Jung, an analyst at Presto Research, noted that broader financial markets, including equities, have been struggling due to persistent macroeconomic challenges, particularly concerns about inflation. “It’s not just cryptocurrencies; indices like the NASDAQ and S&P 500 also dipped over 1% yesterday following unexpected growth in the U.S. economy revealed by ISM data,” Jung said. “This data intensified fears of ongoing inflation, causing bond yields to spike, with the 10-year Treasury reaching its highest level since April.”
Federal Reserve Policies Add to Uncertainty
Rachael Lucas, a cryptocurrency analyst at BTC Markets, highlighted that recent economic data from the U.S. has led traders to believe that the Federal Reserve may maintain elevated interest rates for an extended period.
“Comments made by Federal Reserve Chair Jerome Powell in December had already unsettled markets, as he emphasized the ongoing fight against inflation,” Lucas explained. “This stance has dampened hopes for near-term rate cuts, amplifying market volatility.” In addition, incoming President Trump’s commitment to imposing heavy tariffs could further stoke inflation concerns.
FedWatch Tool and Market Expectations
The CME Group’s FedWatch Tool currently suggests a 95.2% probability that the Federal Reserve will keep interest rates steady between 4.25% and 4.5% during their next policy meeting on January 29. These projections contribute to market uncertainty as traders await clarity on the Federal Reserve’s future moves.
As Donald Trump’s inauguration on January 20 approaches, investors are bracing for potential market turbulence. Lucas remarked, “With a pro-crypto Congress and key appointments such as Scott Bessent as Treasury Secretary and Elon Musk as an advisor, the incoming administration signals a notable shift towards cryptocurrency-friendly policies.”
Key Economic Events to Watch
In addition to Trump’s inauguration, market participants are closely monitoring significant economic developments scheduled for this month. These include the release of the Federal Open Market Committee (FOMC) minutes and non-farm payroll data later this week, along with the Consumer Price Index (CPI) data on January 15. These reports are expected to provide crucial insights into inflation trends and monetary policy risks.
