Investors are favoring US Treasurys over Bitcoin due to economic weakness in Japan and the US job market. Bitcoin struggles to stay above $90,000, with some attributing the decline to concerns about the AI sector. The S&P 500 stays near all-time highs, reflecting increased risk aversion among traders.

The US Federal Reserve’s balance sheet reduction has capped Bitcoin’s rise near $90,000. Retailers like Target and Nike are reporting lower sales, signaling reduced consumer spending. Traders are uncertain about the Fed’s ability to cut interest rates below 3.5% in 2026 due to economic disruptions.

The odds of a Fed rate cut in January fell to 22%, with demand for US Treasurys remaining strong. Bitcoin’s correlation with traditional markets is declining, but the weak demand for Japanese government debt poses contagion risks. Japan’s GDP contraction and currency depreciation impact Bitcoin’s hedge appeal.

Bitcoin’s struggle near $90,000 reflects global growth uncertainty and weak US labor data. Lower interest rates’ positive impact on risk-on assets diminishes as investors become risk-averse. Even with potential inflation, Bitcoin may not serve as an alternative hedge in the near term due to market conditions.

Read more at Cointelegraph: Bitcoin Failure At $90K Driven By Reduced Fed Rate Cut Odds