A digital illustration depicts a fiery descent with Bitcoin symbols falling amidst flames, representing a cryptocurrency market crash.

As Bitcoin's value plummeted, investors watched in dismay as the cryptocurrency market experienced a dramatic crash. By Miami Daily Life / MiamiDaily.Life.

Finance

Bitcoin Dips Below $110K: Will Recession Fears Trigger a $108,000 Bitcoin Price?

Bitcoin may fall to $108K as investors favor bonds/gold due to recession fears and weak labor data.

byAndres Castro

September 4, 2025, 10:22 PM

Executive Summary

Bitcoin’s price is under significant pressure and could drop to $108,000 as investors shift to “safer” assets like government bonds and gold amid recession fears and weak U.S. labor market data.

Weak U.S. labor data led to a flight to safety, pushing Treasury yields down and increasing expectations for a 0.25% Federal Reserve interest rate cut, which benefited equities but not Bitcoin.

Bitcoin maintains a high correlation with tech stocks, and while risk aversion continues to weigh on cryptocurrencies, the potential inclusion of MicroStrategy (MSTR) in the S&P 500 could boost sentiment for the digital asset class.

The Story So Far

Bitcoin’s current price pressure and potential drop to $108,000 are primarily driven by escalating recession fears and weaker-than-expected US labor market data, prompting investors to shift towards “safer” assets like government bonds and gold. This flight to safety is exacerbated by Bitcoin’s high correlation with risk-sensitive tech stocks, even as the Federal Reserve is anticipated to lower interest rates, with lingering skepticism about the sustainability of such easing.

Why This Matters

The current economic climate, marked by weak US labor data and escalating recession fears, is prompting a significant investor shift towards “safer” assets like government bonds and gold, putting substantial downward pressure on Bitcoin and potentially driving its price to $108,000. This flight to safety underscores Bitcoin’s vulnerability to risk aversion, even as anticipated Federal Reserve interest rate cuts offer a differing benefit to equities, highlighting a divergence in market sentiment.

Who Thinks What?

Investors are shifting towards “safer” assets like government bonds and gold due to escalating recession fears and weaker US labor market data, putting significant downward pressure on Bitcoin’s price.

Market participants largely anticipate a 0.25% interest rate cut from the Federal Reserve in September, though skepticism persists among traders regarding the Fed’s ability to sustain extended easing.

Analysts, such as Meryem Habibi, suggest that MicroStrategy’s potential inclusion in the S&P 500 could significantly legitimize the digital asset class, while Bank of America analysts reportedly project that long-term fiscal imbalances could eventually create a favorable scenario for Bitcoin.

Bitcoin’s price is under significant pressure and could potentially drop to $108,000 as investors shift towards “safer” assets like government bonds and gold, driven by escalating recession fears and weaker-than-expected United States labor market data. This flight to safety has seen gold reach an all-time high, while the leading cryptocurrency struggles to maintain bullish momentum.

Market Reaction to Weak Labor Data

The immediate downturn for Bitcoin on Thursday followed a report showing a sharp decline in US private payrolls, with only 54,000 positions added in August, down from 106,000 in July. The Institute for Supply Management (ISM) also reported a contraction in overall employment, fueling investor concerns about economic stability.

In contrast to cryptocurrencies, equities reacted positively to the labor data, with market participants growing more confident that the US Federal Reserve would lower interest rates. Stocks benefit more directly from reduced financing costs and household debt burdens, which can stimulate consumption, while Bitcoin briefly traded under $110,000.

Treasury Yields and Fed Outlook

Demand for safety assets pushed yields on the 2-year US Treasury to 3.60%, their lowest level in four months, indicating investors’ willingness to accept lower returns for security. The consensus for the September 16-17 Federal Open Market Committee (FOMC) meeting points to a 0.25% rate cut, bringing the benchmark down to 4.25%.

However, skepticism persists regarding the Federal Reserve’s ability to sustain such easing for an extended period. The CME FedWatch tool shows a decline in traders expecting January 2026 rates at 3.75% or lower, dropping to 65% from 72% a month ago. The upcoming US Bureau of Labor Statistics report on Friday is anticipated to be crucial in guiding positioning across various risk assets.

Correlation and Potential Catalysts

Bitcoin maintains a high correlation with tech stocks, with Nasdaq’s 60-day correlation sitting at 72%, indicating their movements are largely aligned. Persistent risk aversion, underscored by strong demand for gold and short-term bonds, could continue to weigh heavily on cryptocurrencies, despite potential short-term relief from lower interest rates.

Some analysts suggest that the potential inclusion of MicroStrategy (MSTR) in the S&P 500 could serve as a significant sentiment shifter for the digital asset class. Meryem Habibi, chief revenue officer at Bitpace, argues that such an inclusion would “cements the legitimacy of an entire asset class,” forcing index funds and ETFs to purchase MSTR shares.

Long-Term Outlook

While short-term risk aversion may push Bitcoin to retest the $108,000 mark, the growing demand for short-term Treasurys should not be exclusively viewed as a long-term bearish signal. Fiscal imbalances and potential erosion of confidence in the domestic currency could, over time, create a scenario historically favorable for Bitcoin, as Bank of America analysts reportedly project a strengthening euro against the US dollar by 2026 due to trade frictions and weakening institutional credibility.