The cryptocurrency market is off to a wobbly start in the year 2025, weighed down by speculation that the Fed may have limited scope for further interest rate cuts. Bitcoin briefly fell below $90,000 on Monday, only to cross the $97,000 mark on Tuesday. So far this month, Bitcoin is up 3.8%. However, some smaller tokens, including Ether, have been under pressure this month. Ether, in particular, is off 3.2%.

Investor sentiment has shifted toward the likelihood of a prolonged pause in Fed rate changes due to robust U.S. economic performance. Concerns have also emerged over the potential inflationary impacts of President-elect Donald Trump’s proposed tariff and immigration policies, with his inauguration set for next week.

Rising Treasury yields have cooled enthusiasm for cryptocurrencies, a winning spree offset somewhat by Trump’s promise to make the United States a global hub for digital assets. His plans include crypto-friendly regulations and reversing Biden-era restrictions, but these policies are yet to stabilize the broader market.

The surge in Treasury yields has reverberated through financial markets, triggering selloffs in both crypto and equities. The S&P 500 index has surrendered much of the gains it made after Trump’s election win on Nov. 5. The S&P 500 is off 0.4% so far this year (as of Jan. 14, 2025).

Bitcoin hit an all-time high of $108,316 last month.. Its post-Election Day rally has moderated to about 40%. Katie Stockton, a technical analyst at Fairlead Strategies LLC, observed that Bitcoin remains in a "corrective phase." She indicated that chart trends suggest the possibility of testing downside support near $87,500, as quoted on Bloomberg.

Over the past four trading days, U.S. spot-Bitcoin exchange-traded funds (ETFs) have seen net outflows of approximately $1.6 billion, according to Bloomberg data. This trend indicates the market’s cautious sentiment as investors await further clarity on the policy and economic landscape.

But then, there are hopes. Richard Galvin, co-founder of hedge fund DACM, noted, “higher bond yields and dollar strength have put material pressure on risk assets. However, Trump may prioritize crypto-specific executive orders soon after taking office,” quoted on Bloomberg.

Overall, despite current volatility, optimism persists among crypto enthusiasts. For instance, MicroStrategy Inc. MSTR recently marked its 10th successive weekly Bitcoin purchase, amassing a stockpile worth approximately $41 billion.