Bitcoin Dips Below $87K as Market Turmoil Continues, but Rate Cuts Could Spark Next Rally

The outlook for interest rates has softened significantly in recent weeks, potentially setting the stage for bitcoin’s next leg up.

Crypto Sell-Off Drags Bitcoin Lower

Bitcoin has taken a major hit, sliding more than 20% from its record high of $109,000 just five weeks ago to a low of $87,000 on Tuesday. While broader macroeconomic factors are at play, some investors are blaming the chaos in the rest of the crypto market for BTC’s struggles.

The January rally, which peaked just before Trump’s inauguration, coincided with a speculative surge in memecoins. However, that frenzy quickly turned into a disaster when Trump-themed tokens launched, soared, and then collapsed—leaving most traders deep in the red.

Solana (SOL), which was at the center of the memecoin boom, has dropped over 50% since then, leading the decline among major cryptocurrencies.

Instead of institutional bitcoin adoption, investors got a failed experiment in Trump-linked tokens.

Bybit Hack Sparks Fresh Market Jitters

Despite the market’s struggles, bitcoin had been holding relatively steady until last week, when it appeared ready to reclaim the $100,000 level.

Then, the Bybit hack changed the game.

While the exploit had nothing to do with Bitcoin itself—highlighting vulnerabilities in Ethereum’s ecosystem—panic selling spread across the market. Ether (ETH) has plunged 15% since the hack, and the broader crypto downturn has dragged bitcoin down with it.

Analysts Warn of Further Downside

Even long-term bitcoin optimists are adjusting their outlooks.

“Our expectations for this cycle were much higher than $108,000, so we’ve been telling ourselves that we couldn’t have already peaked,” wrote crypto analyst StackHodler on X. “But the reality is, no one knows for sure. We just dropped below the short-term holder realized price of $92,000… A retest of the 200-day moving average near $82,000 may be necessary.”

Geoff Kendrick, a strategist at Standard Chartered who has previously forecast BTC hitting $200,000 this year, urged caution:

“Do NOT buy the dip yet—$80K is coming,” Kendrick warned. “I think we’ll see a record $1B ETF outflow day before the market stabilizes.” The current highest daily outflow from bitcoin ETFs is -$583 million.

Lower Interest Rates Could Be Bitcoin’s Lifeline

The turmoil isn’t limited to crypto. Traditional markets have also taken a hit, with the S&P 500 suffering its worst weekly performance since Trump’s inauguration. The Nasdaq, which peaked in December, is now down 5% from those highs.

Economic uncertainty, government cost-cutting measures, and softer market sentiment are all playing a role. However, a key factor to watch is interest rates.

The U.S. 10-year Treasury yield has dropped from 4.80% in January to 4.32% today. Meanwhile, traders are now pricing in higher chances of Federal Reserve rate cuts. According to CME FedWatch, the probability of a May rate cut has surged to 30%, while the odds of two cuts by June have jumped to 15%.

“Lower Treasury yields are a major long-term positive for BTC,” Kendrick concluded.