Strong economic data and a surging bond market are raising doubts about the likelihood of interest rate cuts this year, causing a pullback in the crypto market.

While U.S. stock markets were closed on Thursday in honor of former President Jimmy Carter, cryptocurrency markets remained open, absorbing the full impact of growing concerns ahead of Friday’s highly anticipated December employment report.

By late afternoon, bitcoin (BTC) had slipped to just above $91,000, reflecting a 3% decline over the past 24 hours, and dropping to levels not seen in over a month. The broader CoinDesk 20 Index followed a similar downward trend, with notable underperformers including solana (SOL) and chainlink (LINK), both suffering double-digit losses.

The current downturn comes after a strong fourth-quarter rally in 2024, which was fueled by the optimism surrounding Donald Trump’s November victory and the potential for a more crypto-friendly regulatory environment. The rally was also supported by the Federal Reserve’s rate cuts since September. However, recent economic data has painted a picture of a stronger-than-expected economy, causing bond yields to rise significantly, which in turn has led to concerns about the Fed’s next move.

The crypto market is especially sensitive to interest rates, as higher yields make safer assets more attractive and decrease appetite for riskier investments like cryptocurrencies. Today’s selloff follows the release of economic data showing inflationary pressure remains persistent, leading some traders to expect that rate cuts could be pushed further into the future, or even that rate hikes may be needed.

What’s next for bitcoin?

“BTC, ETH, and SOL are revisiting the lows from December 5, and traders are beginning to accept that these levels might not hold,” trader Eugene Ng Ah Sio commented on X. “This is typically when panic starts to set in.”

Ng Ah Sio suggested that if the $90,000 level fails to hold, bitcoin could see further downside toward $85,000, the next significant support level.

Joe McCann, founder of Asymmetric, believes that bitcoin may test the $75,000 range if it cannot maintain support at $90,000.

Meanwhile, trader Skew speculated that the recent price drop could be related to additional bitcoin sales tied to the Silk Road case. However, based on Binance order book data, Skew observed that bid liquidity is strong, outweighing the selling pressure and suggesting that the market may not be as weak as it appears.

“There’s little volatility behind the price drop, likely due to a combination of modest sell flow and solid bid liquidity, which suggests the market isn’t in dire straits,” Skew noted.