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Bitcoin dropped below $97,000 on Tuesday after stronger-than-expected U.S. economic data raised concerns about delayed interest rate cuts. The cryptocurrency fell 5% to $96,361, marking its sharpest decline of 2025.
Ryan Lee, chief analyst at Bitget Research, said, “Bitcoin’s dip stems primarily from strong US economic data pointing toward potential interest rate hikes.” He added, “This development makes cryptocurrencies less attractive as investments.”
The sudden drop came after the U.S. services sector showed unexpected growth in December. This economic strength suggests the Federal Reserve might keep interest rates higher for longer than investors had hoped. When interest rates stay high, investors often choose safer investments like government bonds over riskier assets like cryptocurrencies.
Source: CoinGecko
The impact spread beyond Bitcoin. Ethereum, the second-largest cryptocurrency, fell 8.6%. Crypto-related stocks also took hits, with Coinbase dropping 8% and MicroStrategy falling 9%.
The market reaction triggered a wave of forced sales, with more than $555 million in leveraged trading positions closed. These liquidations occur when traders who borrow money to make larger bets cannot meet their loan requirements.
Despite the current drop, Bitcoin’s overall performance remains strong. The cryptocurrency gained 120% in 2024 and is still up 3% since the start of 2025. However, market watchers warn that similar price swings could continue as investors adjust to changing economic conditions.
MicroStrategy, a business software company known for its Bitcoin investments, continues to buy despite market uncertainty. For $101 million, it purchased 1,070 more Bitcoins, bringing its total holdings to 447,470.
Crypto traders are closely watching where Bitcoin’s price might go next. Popular trader Krillin thinks Bitcoin will likely stay between $90,000 and $92,000 through January, with a possible price jump coming in February. Another well-known investor, Jelle, agrees with this view, pointing to $90,000 as a key price level before Bitcoin might aim higher.
But there’s also concern about what happens if prices fall further. Market watchers warn that if Bitcoin drops below $90,000 and stays there for a full day of trading, it could trigger a much bigger decline. Some analysts say this could lead to a 20% drop, possibly pushing Bitcoin’s price down to $71,500.
Looking ahead, investors are watching two key events this month: Donald Trump’s inauguration on January 20 and the Federal Reserve’s next interest rate decision on January 29. Both could influence Bitcoin’s price as markets remain sensitive to political and economic developments.
The cryptocurrency market’s reaction to economic news shows how digital assets are increasingly connected to traditional financial markets. As Bitcoin becomes more mainstream, its price movements are more affected by the same factors that move stocks and bonds.
