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Bitcoin Sinks Below $90K Amid Fed Rate Cut Worries and Government Sell-Off Fears

HomeBitcoin Sinks Below $90K Amid Fed Rate Cut Worries and Government Sell-Off Fears

Bitcoin Sinks Below $90K Amid Fed Rate Cut Worries and Government Sell-Off Fears

Bitcoin Sinks Below $90K Amid Fed Rate Cut Worries and Government Sell-Off Fears

Bitcoin Price Takes a Hit: Investors Jittery Over Fed Rate Cuts and Government Seized Bitcoins

The past week has been a wild ride for Bitcoin, with the cryptocurrency briefly dropping below $90,000 early Monday morning. This marks the first time since mid-November that Bitcoin's price has dipped to such low levels. While some market analysts attribute this decline to investor jitters over recent economic data, others point to MicroStrategy's latest Bitcoin purchase as a potential factor in maintaining stability.

Bitcoin's Fed Woes: Interest Rate Policy and Its Impact on Risk-On Assets

Sentiment around the Federal Reserve's future interest rate policy has long been a key driver of price movements in both directions for risk-on assets like Bitcoin. In the past, investors have tended to move towards riskier assets such as Bitcoin when interest rates are lower, seeking higher returns in a low-yield environment. Conversely, high interest rates tend to attract investors to treasury yields, reducing demand for riskier assets.

This dynamic is largely due to the increased attractiveness of treasury yields in a high-interest rate environment. However, recent hotter-than-expected labor market data suggests that the Fed's pace of rate cuts may slow this year, reducing investor optimism and contributing to Bitcoin's price decline.

Fears Around Government Selling Seized Bitcoins: A Potential Supply Shock

Adding to investor concerns are reports of a federal judge allowing the U.S. government to sell some of the Bitcoin it seized during enforcement actions. The late December ruling has caught public attention in recent weeks, with investors worrying that approximately 69,370 Bitcoins worth around $6.5 billion could soon enter the market.

The potential supply shock posed by these seized Bitcoins is a significant concern for investors. With only 21 million Bitcoins ever to be created, sudden changes in demand and supply can have a profound impact on price levels. However, some experts suggest that those worries may be unfounded.

MicroStrategy Continues To Buy Bitcoin: Undeterred By Price Volatility

Despite the wild price swings for Bitcoin, MicroStrategy and its CEO Michael Saylor remain committed to their strategy of investing in the cryptocurrency. The company announced its 10th consecutive weekly Bitcoin purchase on Monday, with a total of roughly 2,530 Bitcoins purchased last week for $243 million.

This latest purchase brings the total number of Bitcoins held by MicroStrategy to nearly 450,000, which would be worth close to $41 billion at recent prices. The company's shares were down around 3% in recent trading, but the firm remains committed to its Bitcoin investment strategy.

Bitcoin's Slide Pulled Down Broader Crypto Market: Alternative Assets Perform Poorly

The decline in Bitcoin's price has had a ripple effect on the broader crypto market, with alternative assets performing poorly over the past week. Ether (ETHUSD) is down around 18%, while Solana (SOLUSD) has dropped by 19%. XRP (XRPUSD), however, has bucked this trend and remains up about 1%.

Ripple CEO Brad Garlinghouse posted a picture of himself, Ripple Chief Legal Officer Stuart Alderoty, and U.S. President-elect Donald Trump on X last week, which some viewed as a potentially-positive development for XRP from a regulatory perspective.

Net Inflows into Spot Bitcoin ETFs Remain Positive: Not Enough To Prop Up Prices

Despite the recent price decline in Bitcoin, net inflows into spot Bitcoin ETFs remained positive over the past week. These products have wrapped up their first year of trading, and while they were not enough to prop up prices, they do indicate ongoing interest in Bitcoin investments.

In conclusion, the past week has been marked by significant volatility in the crypto market, with investor jitters contributing to Bitcoin's price decline. While MicroStrategy's continued investment in Bitcoin remains a testament to its potential, concerns over government selling seized Bitcoins and the Fed's rate cut policy will likely continue to impact prices in the coming weeks.