Bitcoin is starting the week in the red despite a series of promising developments for the crypto sector, including the U.S. Securities and Exchange Commission’s (SEC) softened regulatory stance and former President Donald Trump’s establishment of a crypto-focused working group.
As of Monday, January 27, Bitcoin is trading at approximately $98,600, marking a 7% decline from Sunday’s high of $105,500. The pullback reflects investor caution as the global economic calendar is packed with significant events this week.
Macroeconomic Factors Weigh on Bitcoin
This week’s key market drivers include the U.S. Federal Open Market Committee (FOMC) meeting, the European Central Bank’s (ECB) interest rate decision, and the U.S. Personal Consumption Expenditure (PCE) index release. Analysts expect these developments to influence investor sentiment across financial markets, including cryptocurrencies.
According to TRADING ECONOMICS, the Federal Reserve and the ECB are likely to maintain current interest rates as both central banks remain focused on achieving a 2% inflation target. The prospect of steady or higher interest rates could keep investors wary of risk assets like Bitcoin.
Additionally, the core PCE index, a critical measure of U.S. inflation, is expected to rise by 0.1% to 0.2% month-over-month. This modest increase may strengthen the Federal Reserve’s resolve to maintain or even hike interest rates, as hinted at by BlackRock CEO Larry Fink during the World Economic Forum in Davos.
Rate Hike Speculation Looms Large
Fink’s comments align with Bank of America’s recent analysis, which argued that stronger-than-expected U.S. job numbers might prompt the Fed to tighten monetary policy further. This cautious outlook has dampened investor appetite for speculative assets, adding pressure on Bitcoin’s price.
Goldman: Now expecting two rate cuts this year, in June and Dec, instead of three (loses the March cut)
— Nick Timiraos (@NickTimiraos) January 10, 2025
JP Morgan: Also removes a March cut. June + Sept.
BofA: The cutting cycle is at an end. An extended hold is most likely. The next move is more likely to be up than down.
Broader Market Concerns
Beyond interest rate fears, growing speculation that the U.S. artificial intelligence (AI) sector may be overvalued is contributing to a risk-off sentiment. This bearish tone appears to be spilling over into the cryptocurrency market, as traders lock in profits and brace for potential volatility.
Also Read: BlackRock Adds $1 Billion in Bitcoin, Now Controls 2.7% of BTC Supply Amid Bold Market Moves
Bitcoin’s short-term trajectory remains uncertain, with traders closely monitoring macroeconomic signals and central bank decisions for clues on market direction.
Disclaimer: The information in this article is for general purposes only and does not constitute financial advice. The author’s views are personal and may not reflect the views of Chain Affairs. Before making any investment decisions, you should always conduct your own research. Chain Affairs is not responsible for any financial losses.
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