Bitcoin has experienced a decline of over 3%, trading below $91,000 as of January 13, amidst wider market downturns influenced by traders adjusting their expectations about potential interest rate cuts by the Federal Reserve in 2025. This adjustment follows strong U.S. employment data, with the Bureau of Labor Statistics reporting a 256,000 increase in nonfarm payrolls and a drop in the unemployment rate to 4.1%. The robust job market signals a cautious stance from the Fed, who are planning only two rate cuts in 2025 as challenges persist in reaching their 2% inflation target.
The rising U.S. Treasury yields, reflecting higher opportunity costs for yield-bearing assets, are impacting riskier investments like cryptocurrencies, leading to a risk-off sentiment and subsequent declines in major stock indexes. Upcoming economic reports regarding consumer and wholesale prices on January 14 and 15 are anticipated to offer further insights into inflation trends as the Fed’s policy meeting approaches at the end of the month.
Recent surveys indicate an increase in inflation expectations among consumers for the near and long term, which may further restrict the Fed’s ability to lower rates, contributing to a bearish outlook for the Bitcoin market. Bitcoin’s Net Unrealized Profit/Loss (NUPL) index has moved into the “Belief—denial” zone, signifying local market tops, as selling pressure from profit-taking investors continues to drive prices down.
Technically, Bitcoin is also showing signs of a potential bearish reversal with a forming head-and-shoulders pattern. This classic pattern comprises three peaks and suggests a possible trend change should Bitcoin fall below the neckline support around $91,000. Failure here could potentially drive Bitcoin’s price towards a target near $76,750. As Bitcoin continues to hover in a vulnerable position, the relative strength index suggests room for further declines, adding to the cautious market sentiment.