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February 6, 2025

Bitcoin Price Plummets to 5-Week Low: What’s Behind the Sudden Drop?**

The cryptocurrency market is bracing for a potential shift in trajectory as the price of Bitcoin plummeted to a five-week low, dipping below $90,000 for the first time since mid-November. This significant decline has left investors and enthusiasts wondering what’s behind the sudden drop and what it means for the future of the crypto market.

On Monday, the Bitcoin price fell as low as $89,800, marking a notable decline from its all-time high of $108,000 reached nearly a month ago. According to David Duong, Coinbase’s Head of Institutional Research, macro factors are driving Bitcoin’s performance, with concerns about the Federal Reserve’s potential decision not to cut rates in 2025 putting pressure on assets across the board.

The recent employment data, which showed a stronger-than-expected labor market, has led to increased doubts about the Fed’s rate-cutting cycle. “Given the recent employment data, concerns that the Fed may not deliver any cuts in 2025 are putting pressure on assets across the board,” Duong noted. “Though if that decision is a product of a stronger economy, that may not last, in our view.”

The Fed’s decision to hold rates steady or cut them at a slower pace could have significant implications for the crypto market. Lower interest rates tend to be supportive of risk assets like stocks and crypto, but they can also contribute to inflation through lower borrowing costs and increased spending. As the crypto community looks ahead to President-elect Donald Trump’s inauguration on January 20, market players are speculating about potential shifts in crypto regulation.

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Trump has promised to create a strategic stockpile of Bitcoin and has styled himself as a “crypto president,” but the impact of his policies on the market remains to be seen. In the short term, the market will be closely watching the Bureau of Labor Statistics’ inflation snapshot, which is set to be released on Wednesday. Economists expect the Consumer Price Index to show inflation was flat at 2.7% in the 12 months through December.

As the crypto market navigates this period of uncertainty, one thing is clear: the path forward will be shaped by a complex interplay of macroeconomic factors, regulatory developments, and market sentiment. Will Bitcoin’s price continue to decline, or will it rebound as the market adjusts to the new reality? Only time will tell.

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Source: Coinbuzzfeed.com

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