Bitcoin's Recent Decline

Bitcoin (BTC) kicked off the new week with a disappointing plunge below $93,000, following a strong U.S. jobs report that led major investment banks to revise their Federal Reserve (Fed) rate cut forecasts. According to CoinDesk, the leading cryptocurrency by market capitalization faced a 1.6% decline, raising concerns as it approached the critical support level of $92,000, a threshold that has held firm since late November.

Broader Market Sentiment

The broader market sentiment was equally grim, with the CoinDesk 20 Index, which tracks a range of cryptocurrencies, dipping over 3%. Notable names like XRP, ADA, and DOGE experienced even steeper losses during the same time frame.

Traditional Markets Reaction

In traditional stock markets, futures linked to the S&P 500 fell by 0.3%, continuing Friday's notable 1.5% drop that brought the index to its lowest point since early November. Additionally, the dollar index (DXY) approached 110 for the first time since late 2022, buoyed by rising Treasury yields, which added pressure on equities.

Impact of the December Jobs Report

The December jobs report revealed that nonfarm payrolls surged by 256,000, significantly surpassing the anticipated 160,000, and marking the most substantial growth since March. This surprising performance pulled the unemployment rate down to 4.1% from 4.2%, although average hourly earnings increased by a modest 0.3% month-on-month, falling just shy of expectations.

Goldman Sachs' Rate Expectations

In light of these developments, Goldman Sachs has revised its expectations on Fed interest rate cuts, now pushing the anticipated timeline for the next cut from March to June 2025. Their recent analysis suggests a more conservative approach, with only two cuts expected in 2025 and another potential cut in June 2026.

Analyst Predictions on Future Cuts

"If the December FOMC decision indicated a significant return to prioritizing inflation, the latest employment data may further support that risk. The soft wage growth figure has alleviated immediate concerns over overheating, while the need for cuts to protect the labor market appears to diminish," Goldman noted.

Bitcoin's Rally During Rate Cuts

The Fed initiated its rate-cutting strategy in September, having lowered the benchmark borrowing rate by 50 basis points, followed by steady cuts in subsequent months. Bitcoin enjoyed a remarkable rally of over 50% during this rate-cutting period, previously peaking above $108,000.

Contrasting Views from Other Analysts

Contrary to Goldman’s outlook, analysts from Bank of America (BofA) now predict an extended hold on rates with potential risks leaning towards a hike or tighter policies. They pointed out, “Our analysis suggests the cutting cycle has reached its conclusion and risks favor an upcoming rate increase,” highlighting a 100 basis point increase in the U.S. 10-year Treasury yield since the last cut.

Market Sensitivity to Economic Data

ING also expressed similar sentiments, acknowledging that the market is rightly perceiving the possibility of the Fed maintaining a pause given the current economic conditions. They cautioned that if core inflation remains at 0.3% month-on-month for a fifth consecutive month, it could reinforce the Fed's hawkish stance ahead of the consumer price index (CPI) report due on January 15.

Future Outlook for Cryptos