- Investors are shifting to safer assets as demand for US Treasurys rises and chances for Federal Reserve rate cuts decline.
- Bitcoin remains below $92,000 amid economic pressures from weak US job data and Japan’s economic contraction.
- The Federal Reserve’s balance sheet reduction has drained liquidity, capping Bitcoin’s price near $90,000.
- Gold is preferred over Bitcoin as a hedge during economic uncertainty.
- Japan’s economic weakness and higher bond yields increase contagion risks, limiting Bitcoin’s appeal as a hedge.
Over the past month, Bitcoin (BTC) has repeatedly failed to sustain levels above $92,000. This price weakness occurs amid shifting investor preferences toward safer assets, driven by strong demand for US Treasurys and declining odds of Federal Reserve interest rate cuts. Despite some speculations about market factors, the main causes appear linked to broader economic concerns.
By comparison, the S&P 500 index traded only 1.3% below its all-time high on a recent Friday, while Bitcoin lags about 30% below its peak near $126,200 reached in October. This disparity highlights growing risk aversion among traders. Meanwhile, gold has become the favored option for portfolio protection, despite Bitcoin’s decentralized appeal.
A key factor capping Bitcoin near $90,000 is the US Federal Reserve’s ongoing reduction of its balance sheet throughout 2025. This policy drains market liquidity. However, December saw a reversal due to softening US job market indicators and consumer data. Retailers including Target, Macy’s, and Nike have reported weaker sales and lower earnings forecasts, signaling reduced consumer spending that typically pressures higher-risk assets.
Trader uncertainty surrounds the Fed’s ability to reduce interest rates below 3.5% in 2026. This is partly due to a 43-day government funding shutdown disrupting November employment and inflation reports. The probability of a rate cut at the Fed’s January 28 meeting dropped to 22%, while demand for US Treasurys stayed firm, with 10-year yields steady at 4.15%. These trends reflect increasing risk aversion and weaker appetite for Bitcoin.
Although Bitcoin’s correlation with traditional markets has declined, investors are not insulated from poor economic conditions. Japan, holding the world’s fourth-largest economy, faced a 2.3% annualized GDP contraction in the third quarter. The nation’s 10-year bond yields surpassed 2% for the first time since 1999, raising contagion concerns amid Japan’s decade-long negative interest rate policy.
Bitcoin’s challenges near $90,000 are tied to concerns over global economic growth and deteriorating US labor market data. As risk aversion rises, the usual positive effects of rate cuts and stimulus on risk assets diminish. Consequently, Bitcoin is currently unlikely to serve as a strong alternative hedge, even with potential inflation increases.
This information provides an overview of recent market dynamics affecting Bitcoin and related asset classes. For additional details and real-time data, see TradingView and the CME FedWatch Tool.
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