Bitcoin News Today: Bitcoin Slides to $85K as Fed Caution Spurs Broad Crypto Selloff

Bitcoin fell to around $85,000 on Wednesday, reaching its lowest point in the past week amid a broad decline in risk appetite across the cryptocurrency market. Traders and investors are growing increasingly cautious, with major digital assets like Ethereum and XRP also sliding. The drop follows growing concerns over macroeconomic uncertainty and a hawkish stance from the Federal Reserve after its December rate cut.

Market participants are closely watching the potential fallout from the Fed's policy trajectory, with some analysts warning of a deeper correction in crypto prices. Mike McGlone of Bloomberg Intelligence has raised alarms about the possibility of a significant crypto crash by 2026, drawing parallels to the 2007 stock market peak before the 2008 financial crisis. Meanwhile, institutional interest in altcoins like XRP remains mixed, with ETF inflows offering a glimmer of support.

Bitcoin's decline has been especially sharp since hitting a peak of $126,000 in October, with the digital asset now down more than 30% from that high. This has reignited fears of a broader market downturn, with some analysts suggesting that the current drawdown could evolve into a long-term bearish trend. The Fed's policy decisions and macroeconomic data will likely play a central role in determining whether this is a short-lived dip or the start of a deeper bear market.

Fed Policy and Market Sentiment

The Federal Reserve's December rate cut, while providing temporary relief, has done little to restore confidence in risk assets, including cryptocurrencies. The accompanying "wait-and-see" stance from the Fed has only intensified the bearish sentiment, with futures markets currently pricing in a 73% probability of unchanged rates in January. This uncertainty has led to a risk-off environment, with institutional investors withdrawing from crypto ETFs and reducing exposure.

Bitcoin's price has fallen nearly 25% since the Fed's rate cut on September 17, raising questions about whether this is the start of a post-inflation deflationary spiral.

McGlone has warned that such a scenario could lead to a dramatic collapse in speculative digital assets, with Bitcoin potentially reverting to levels as low as $10,000 in 2026. This dire forecast has sent ripples through the market, as traders reassess their positions and hedge against further declines.

Analysts' Diverging Views

Market analysts are split on the outlook for Bitcoin and other cryptocurrencies. While some see a potential rebound driven by oversold conditions, others caution that the bearish technical indicators, such as declining moving averages and the Relative Strength Index, point to a continuation of the downtrend. David Morrison of Trade Nation noted that Bitcoin's failure to break key resistance levels has increased the risk of another pullback to $80,000. The MACD indicator, a key tool for gauging momentum, is also showing signs of bearish confirmation.

On the other hand, XRP has shown relative resilience, with ETF inflows exceeding $1 billion since their debut in November. Bitwise's XRP ETF and Franklin Templeton's XRPZ have led the way, suggesting that institutional interest in altcoins remains a potential source of support. However, this does not negate the broader bearish trend, as Bitcoin and Ethereum ETFs have seen outflows, signaling a flight to safety amid macroeconomic uncertainty.

What This Means for Investors

Investors are now faced with a challenging environment, where short-term volatility is likely to persist. Those with exposure to Bitcoin and other cryptocurrencies are closely monitoring technical indicators, with a key focus on whether Bitcoin can hold above $80,600 without breaking lower. A breakdown below that level could trigger further selling pressure and accelerate the downtrend.

For Ethereum, the situation is similarly uncertain. The altcoin is currently trading below its 50-day and 200-day exponential moving averages, with the RSI in bearish territory. A move below $2,900 could see the price extend its losses toward November's low of $2,623. XRP, while slightly more stable, faces its own challenges with the RSI approaching oversold levels and the MACD confirming a sell signal.

The market is also watching for potential policy changes in the U.S. and global markets. The Trump administration's recent move to allow cryptocurrencies in 401(k) retirement plans has been a positive development for institutional investors, but the broader economic environment remains a concern. With the Fed's next moves and macroeconomic data still in focus, the crypto market is likely to remain in a state of heightened uncertainty for the foreseeable future.