Bitcoin pulls back as Fed’s December minutes signal slower rate cuts in 2025
2025-01-09
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Bitcoin has retreated from its early-week high of over $102,000 as global markets reacted to the Federal Reserve's December meeting minutes. The minutes revealed that Fed officials anticipate slowing the pace of interest rate cuts in 2025, citing concerns about persistently high inflation and potential economic challenges, including tariffs and other policy shifts under the new Trump administration.
The minutes from the Dec. 17-18 meeting noted that “recent higher-than-expected readings on inflation, and the effects of potential changes in trade and immigration policy, suggested that the process could take longer than previously anticipated."
Additionally, the minutes highlighted that there were divisions among policymakers over whether to cut rates at the December Federal Open Market Committee meeting. While the decision to cut rates by 25 basis points was ultimately approved, it was a closely debated issue within the Fed.
Amid ongoing concerns about inflation, the CME FedWatch tool suggests the central bank will likely hold rates steady at its next FOMC meeting on January 29, maintaining the federal funds rate at 4.25%-4.50%. Over 93% of interest traders see a likelihood of a rate pause at the next meeting.
On Wednesday, the yield on the 10-year Treasury bond—a critical benchmark for global financial markets—rose above 4.7%, its highest level since April. This increase in yield reflects a drop in the prices of existing bonds, as bond prices and yields move inversely. Additionally, U.S. stocks experienced a mixed session on Wednesday, with volatility driven by fluctuations in Treasury yields. U.S. markets will be closed on Thursday in observance of a National Day of Mourning for former President Jimmy Carter.
Crypto markets react to macro uncertainty
QCP Capital analysts highlighted that crypto markets continue to face headwinds from broader macroeconomic trends. "The Fed indicated they will slow the pace of rate cuts, given the risks of inflation," the analysts noted. "Meanwhile, yesterday’s ADP employment survey showed a slowdown in private sector hiring, which contrasted with Tuesday’s stronger-than-expected JOLTS job openings report."
In the derivatives market, QCP Capital observed increased activity, with steepening across all tenors. "The desk continues to observe selling pressure on front-end volatility, with 17 January ATM options priced 3 vols lower than last night," the analysts added.
With U.S. markets closed today, bitcoin is expected to consolidate in the $92,000 to $95,000 range. However, a break below $92,000 could expose the $90,000 level, QCP Capital warned.
Omni Network CEO Austin King commented on the political landscape, highlighting the impact that crypto-friendly policies under the new Trump administration. “The Republican Party’s pro-crypto stance likely attracted voters holding digital assets,” King told The Block. “However, markets will rise if Trump actively pursues pro-crypto policies or fall if investors perceive a lack of follow-through.”
Bitcoin's price is now hovering above the $93,400 mark, posting a slight decrease of around 1.4% over the past 24 hours, according to The Block's Price Page.
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