Bitcoin prices fell on Tuesday, influenced by broader market trends and concerns about persistent inflation. While investors remain optimistic about the future of cryptocurrencies, uncertainty surrounding the Federal Reserve's interest rate cuts creates potential volatility.
The price of bitcoin dropped by 4.8% to $97,183.80 on Tuesday, according to Coin Metrics. This decline follows the performance of the broader cryptocurrency market, which has been impacted by concerns about persistent inflation. The U.S. services sector showed growth in December, leading to worries about inflation staying high. Rising yields typically put pressure on growth-oriented risk assets, like cryptocurrencies.
Bitcoin traded above $102,000 on Monday and analysts predict it could potentially double this year from that level. Investors are optimistic that clearer regulations will support digital asset prices, benefiting stocks like Coinbase. However, uncertainty surrounding the Federal Reserve's interest rate cuts could create volatility in the cryptocurrency market. The central bank signaled in December that although it will cut rates a third time, it may reduce the number of rate cuts in 2025 compared to investor expectations. Historically, rate cuts have been positive for bitcoin prices, while hikes have been negative.
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