Investing.com– Bitcoin retreated on Wednesday, extending overnight losses and wiping out a recent rebound as heightened concerns over slower interest rate cuts in 2025 sparked deep losses across risk-driven assets.
The world’s largest cryptocurrency had briefly risen past the coveted $100,000 level as it marked an extended recovery from a late-December rout. But Tuesday and Wednesday’s losses saw the crypto wipe out the entirety of its recovery, putting it back in sight of late-December lows.
fell over 4% to $95,427.0 by 09:51 ET (14:51 GMT), after losing over 5% on Tuesday.
The crypto was also subject to some profit-taking after logging a stellar 2024. A bulk of Bitcoin’s gains came after Donald Trump’s victory in the presidential election, given that he had promised to enact crypto-friendly policies.
But crypto markets were now awaiting more cues on Trump’s policy plans, as he takes office on January 20.
Rate jitters batter Bitcoin
Losses in Bitcoin came in tandem with broader risk-driven markets, as stronger-than-expected U.S. economic data fueled concerns that the Federal Reserve will cut interest rates at a slower pace in 2025.
data for November read higher than expected, coming just days before data for December, which is expected to offer more definitive cues on the labor market.
Stronger-than-expected data for December, while presenting a brighter picture of the U.S. economy, also pushed up concerns that inflation will remain sticky in the coming months, giving the Fed even more impetus to cut interest rates slowly.
The central bank had slashed its outlook for interest rate cuts in 2025 during its December meeting, citing concerns over sticky inflation and confidence in the labor market.
Fed officials reiterated this messaging earlier this week.
Higher for longer rates bode poorly for speculative assets such as crypto, given that they limit the amount of liquidity that can be deployed into the sector. This trend had battered crypto markets through 2022 and most of 2023.
Bitcoin could benefit from new US Treasury liquidity in Q1, Bitmex co-founder says
Bitcoin could see a boost from over $612 billion in new liquidity during the first quarter of 2025, which may help ease investor concerns about delays in U.S. crypto regulations, according to a crypto entrepreneur.
While President-elect Donald Trump’s inauguration on Jan. 20 is viewed as a positive development for the crypto sector, uncertainty around regulatory progress could weigh on investor sentiment and valuations.
Arthur Hayes, co-founder of BitMEX, believes that the influx of liquidity into the U.S. Treasury by March 2025 could offset potential setbacks in crypto legislation.
“A letdown by team Trump on his proposed pro-crypto and pro-business legislation can be covered by an extremely positive dollar liquidity environment, an increase of up to $612 billion in the first quarter,” he wrote in a Jan. 7 blog post.
Hayes anticipates that increased money printing following Trump’s inauguration will push Bitcoin to a local high in March, but he expects a correction to follow. This pullback, according to Hayes, will likely stem from disappointment over slow progress on crypto policy from the new administration.
Crypto price today: altcoins track Bitcoin losses
Broader crypto prices fell tracking Bitcoin, also wiping out a recovery seen over the past week. Losses in several major altcoins were far more pronounced than those seen in Bitcoin.
World no.2 crypto fell over 7% to $3,355.90, while world no.3 crypto slid 4.4% to $2.321.
Compass Point Research analysts said Ether was likely to outpace Bitcoin this year, as friendlier U.S. regulations will see investors diversify beyond the world’s biggest cryptocurrency.
, , and slid between 7% and 14%, while among meme tokens, tumbled 9.5%.
Ambar Warrick contributed to this report.
