The first week of 2025 has been challenging for Bitcoin. The leading cryptocurrency dropped sharply from $102,431 to $91,215, before recovering to around $95,000. However, the weekly candle is expected to close bearish, signaling potential headwinds for the asset.
Matrixport’s latest report attributes this price movement to macroeconomic challenges and shifts in global liquidity. The report also highlights that Federal Reserve policies significantly influence Bitcoin’s price movements, often outweighing the impact of ETF fund inflows.
Fed’s Hawkish Policies Limit Growth
The Federal Reserve’s hawkish stance has created uncertainty for Bitcoin traders and investors. Following the December Federal Open Market Committee (FOMC) meeting, inflows into Bitcoin exchange-traded funds (ETFs) stalled, remaining at a record high of $35.9 billion. This stagnation signals investor caution amid concerns over tighter monetary policies.
#MatrixOnTarget Report📊 – Jan 10: Manage #Bitcoin Risk With #Options#Crypto #CryptoMarketOverview #CryptoInvestors #BTC #ETF #Matrixport pic.twitter.com/4f4yaTo7fj
— Matrixport Official (@Matrixport_EN) January 10, 2025
Matrixport’s analysis suggests that Bitcoin price trends often lag behind liquidity shifts by approximately 13 weeks. With the Fed maintaining its restrictive stance, the cryptocurrency may enter a period of sideways price action, consolidating near current levels.
Historical Trends Highlight Policy Influence
Historical data underscores the correlation between Federal Reserve policies and Bitcoin price performance. In early 2024, Bitcoin experienced a significant rally when the Fed adopted a dovish tone in January. However, indecision over rate cuts in March led to a six-month consolidation.
A renewed dovish approach in Q4 2024 fueled a robust uptrend, pushing Bitcoin past $100,000. This historical pattern suggests that a dovish Fed stance is more conducive to sustained Bitcoin growth.
Despite former President Trump’s pro-crypto agenda, the Fed’s current hawkish stance may restrict the cryptocurrency’s potential for another significant rally
Strategies for Navigating Consolidation
For traders navigating a potential consolidation phase, Matrixport recommends exploring call and put options. These financial instruments offer a cost-effective way to protect gains while maintaining exposure to market movements.
With macroeconomic conditions remaining uncertain, adopting a cautious trading strategy could help investors weather this period of stagnation and prepare for potential volatility ahead.
While Bitcoin’s long-term fundamentals remain strong, short-term challenges driven by monetary policy may weigh on its price action. Traders and investors must keep a close eye on Fed policy developments to assess the cryptocurrency’s trajectory in the months ahead.
