Interest Rate Concerns Cause Bitcoin Price Fall
08 Jan, 2025 ● Vijesti o kovanicama
The recent correction in Bitcoin appears to have been influenced by concerns over the U.S. Federal Reserve’s tightening monetary policy, which analysts believe could become a key factor shaping Bitcoin’s price movements in 2025.
On Jan. 7, Bitcoin’s price briefly surpassed the $100,000 psychological mark for the first time since Dec. 19, before correcting to the $92,500 mark.
Ryan Lee, chief analyst at Bitget Research, attributed Bitcoin’s drop to $92,500 largely to mounting concerns about the Federal Reserve’s plans for tighter monetary policy in 2025. He explained to Cointelegraph:
“Bitcoin’s dip stems primarily from strong US economic data pointing toward potential interest rate hikes. This development makes cryptocurrencies less attractive as investments, while the Federal Reserve’s signals of tighter monetary policy further intensify market corrections.”
Expectations for a potential rate cut by the Federal Reserve have been delayed due to signs of economic resilience. Markets now anticipate the first lending rate cut to occur on June 18, based on estimates from the CME Group’s FedWatch tool.
For the Federal Reserve’s next meeting on Jan. 29, there is a 95.2% probability that interest rates will remain unchanged.
Bitcoin’s correction led to the liquidation of over $631 million in leveraged long positions within 24 hours, according to CoinGlass.
Ryan Lee added that such a significant liquidation could prompt a consolidation phase as traders reduce their exposure to leverage:
“The interplay between macroeconomic indicators and crypto market dynamics will remain a critical factor influencing investor behavior and overall market performance in the coming weeks.”
Analysts suggest Bitcoin’s price could drop below $90,000 before starting a strong rally toward $126,000. John Glover, chief investment officer of Ledn and former managing director at Barclays, told Cointelegraph:
“This could lead us to test the $90,000 level again before the next significant move higher. Using wave analysis, we appear to be completing what I view as the fourth wave, suggesting a rally toward the $126,000–$128,000 range following this consolidation phase.”
To prevent further downside, Bitcoin needs to hold above the $91,000 support level, according to a Jan. 8 X post by crypto analyst Rekt Capital:
“Bitcoin has failed its Daily retest, losing $101165 (black) convincingly as support. As a result, Bitcoin has reverted back into its $91000–$101165 range once again.”
Despite short-term corrections, analysts remain optimistic about Bitcoin’s long-term trajectory, with some predicting a cycle top above $150,000 in late 2025.
This optimism is driven by a projected $20-trillion increase in the global money supply, which could channel $2 trillion of investment into Bitcoin.
Sources:
https://www.cmegroup.com/markets/interest-rates/cme-fedwatch-tool.html
https://www.coinglass.com/LiquidationData
https://x.com/rektcapital/status/1876933168533516415/photo/1
