Bitcoin Erasing Gains From Brief Rebound Past $100,000 Due to Fears of Slower Interest Rate Cuts in 2025

The cryptocurrency fell over 4% to $95,427 by 14:51 GMT, after dropping more than 5% on Tuesday. This decline wiped out gains from its recovery after a late-December slump.

Bitcoin slid further on Wednesday, erasing a brief rebound past the $100,000 mark on Tuesday amid concerns over slower interest rate cuts in 2025. The cryptocurrency fell over 4% to $95,427 by 14:51 GMT, after dropping more than 5% on Tuesday.

This pullback follows Bitcoin’s stellar 2024 performance, which was largely driven by optimism over Donald Trump’s presidential victory and his promise of pro-crypto policies. However, investors are now seeking clearer signals on his administration’s crypto plans ahead of his January 20 inauguration.

Bitcoin had recovered from a late-December slump on hopes of the Fed slowing its pace of interest rate hikes this year. But stronger-than-expected U.S. economic data has raised concerns about the central bank maintaining higher rates for longer.

November job openings exceeded expectations, and purchasing managers’ index data highlighted persistent inflation risks, fuelling worries that the Fed will slow its pace of rate cuts in 2025. Such conditions have historically limited liquidity in speculative markets, including crypto.

Broader cryptocurrency prices also suffered steep losses on Wednesday. Among the top 10 coins, Ethereum fell over 7% to $3,355.90, while XRP dropped 4.4% to $2.321. Solana, Cardano, and Polygon recorded declines ranging from 7% to 14%.

Meme tokens also slid, with Dogecoin losing 9.5%. Despite the downturn, analysts suggest that Ethereum may outperform Bitcoin this year, especially if there are positive developments in U.S. crypto regulations.

Meanwhile, BitMEX co-founder Arthur Hayes expressed cautious optimism for crypto in 2023. He predicts a liquidity boost from $612 billion in new U.S. Treasury funds during Q1 2025, which may temporarily bolster Bitcoin.

However, Hayes also anticipates a market correction tied to slow regulatory progress under the Trump administration. According to him, this could lead to a sell-off in Q3 2025, impacting crypto prices.

The crypto market is known for its volatility, and investor sentiment is constantly being influenced by a variety of factors, including regulatory uncertainty and macroeconomic pressures.