The cryptocurrency’s drop follows broad declines in global markets, with investors selling risky assets amid uncertainty over the Fed’s policy moves.

U.S. stock selling eased slightly in the afternoon before the weekend, but investors remained cautious. Many are closely watching next week’s economic data after the government reopened following a record 43-day shutdown.

Experts say Bitcoin and other risk assets are particularly sensitive to interest rate expectations. The lack of clear signals from the Fed has added to market nervousness.

Bitcoin’s fall shows how sensitive the market is to Fed decisions. Even small hints about interest rates can trigger big moves in cryptocurrencies. Investors are staying alert, expecting more volatility when new economic data comes out next week.

"Bitcoin and crypto have generally enjoyed a positive correlation with good times in equities, so it has not become an asset of alternative value to hedge against fear in other sectors," said Juan Perez, director of trading at Monex USA in Washington.

"If there is no enthusiasm toward risk-taking, it seems like that also translates into hesitation with bitcoin and the like."

Read more: Bitcoin falls from $126,000 to $104,783 in just two days shocking traders

Risky assets overall have come under pressure in recent days as expectations of a rate cut from the Fed next month have shrunk as a growing number of policymakers signaled an inclination to hold off on easing.

Kansas City Fed President Jeffrey Schmid, a voter on the policy-setting Federal Open Market Committee, was the latest central bank official to express doubts about a December rate cut. He said on Friday his concerns about "too hot" inflation go well beyond the narrow effects of tariffs alone.

Markets now price in about a 40% chance of a December rate cut, down from about 90% earlier this month and just over 60% earlier this week.