Bitcoin (BTC) Dips Below $93K as Major Banks Reassess Fed Rate Cut Expectations

Bitcoin (BTC) started the new week on a negative note as major investment banks reassessed their expectations for Federal Reserve (Fed) rate cuts following Friday's strong jobs report.

Bitcoin (BTC) dropped below the $93,000 level on Monday as major investment banks reassessed their expectations for Federal Reserve (Fed) rate cuts following Friday's strong jobs report.

The leading cryptocurrency by market value dropped by 1.6% during the day to trade below $92,800 as of European hours, according to data source CoinDesk. Prices were poised to test the support zone near $92,000, which has acted as a floor since late November.

The CoinDesk 20 Index, a broader market gauge, was down over 3%, with major coins like XRP, ADA, and DOGE posting bigger losses.

In traditional markets, futures tied to the S&P 500 traded 0.3% lower, indicating an extension of Friday's 1.5% drop that pushed the index to the lowest since early November. The dollar index (DXY) neared 110 for the first time since late 2022, with high Treasury yields supporting further gains.

Data released Friday showed that nonfarm payrolls increased by 256,000 in December, the most since March, easily beating expectations for 160,000 job additions and December's previous figure of 212,000. The jobless rate declined to 4.1% from 4.2%, while average hourly earnings rose by 0.3% month-on-month and 3.9% year-on-year, which was slightly lower than anticipated.

The jobs report prompted Goldman Sachs to push out the next interest rate cut to June from March.

“Our economists now expect the Fed to cut just twice in 2025 (Jun/Dec vs Mar/Jun/Dec previously), with another rate cut in June 2026,” Goldman's Economic Research note to clients said on Jan. 10.

“If December's FOMC decision marked a material shift back towards inflation in the Fed’s relative weighting of risks, the December jobs report may have completed the pendulum swing. The soft average hourly earnings figure kept the print from sending a more alarming re-heating signal, but the case for cutting to mitigate risks to the labor market has faded into the background,” the note added.

The Fed began cutting rates in September when it officials reduced the benchmark borrowing cost by 50 basis points. The bank delivered quarter-point rate cuts in the following months before pausing in December to signal fewer rate cuts in 2025. BTC has surged over 50% since the first rate cut on Sept. 18, hitting record highs above $108,000 at one point.

While Goldman and JPMorgan still expect rate cuts, Bank of America (BofA) fears an extended pause, with risks skewed in favor of a rate hike or renewed tightening. Notably, the U.S. 10-year Treasury note yield, which is influenced by interest rate, growth and inflation expectations, has already risen by 100 basis points since the Sept. 18 rate cut.

“We think the cutting cycle is done … Our base case has the Fed on an extended hold. But we think the risks for the next move are skewed toward a hike,” BofA analysts said in a note, according to Reuters.

ING stated that “The market is right to price in the risk of an extended Fed pause” in light of the recent economic data.

“That view will only increase if core inflation comes in at 0.3% month-on-month for a fifth month running next week,” ING said in a note to clients over the weekend.

The December consumer price index report is due out on Jan. 15. Some observers are concerned that base effects could push up both the headline CPI and the core CPI, bolstering the hawkish Fed narrative.