Bitcoin’s recent correction was likely triggered by concerns regarding the US Federal Reserve’s tightening monetary policy, which may emerge as the main factor influencing Bitcoin’s price action in 2025, analysts told Cointelegraph.
Fed monetary policy concerns push BTC price lower
Bitcoin’s (BTC) price temporarily breached the $100,000 psychological mark on Jan. 7, for the first time since Dec. 19, before staging a correction to $92,500, Cointelegraph Markets Pro data shows.
BTC/USDT 1-day chart. Source: Cointelegraph
Bitcoin’s dip to $92,500 was mainly triggered by growing concerns over the Federal Reserve’s tightening monetary policy for 2025, according to Ryan Lee, chief analyst at Bitget Research.
The analyst told 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.”
Signs of economic resilience have delayed expectations of a potential rate cut by the Federal Reserve, with markets now expecting the first lending rate cut to occur on June 18, according to the latest estimates of the CME Group’s FedWatch tool.
Target interest rate probabilities. June 18. Source: CME Group
As for the Federal Reserve’s next meeting on Jan. 29, markets are expecting a 95.2% probability that interest rates will remain unchanged.
Bitcoin’s correction liquidated over $631 million worth of leveraged long positions in the past 24 hours, CoinGlass data shows.
Bitcoin liquidation heatmap. Source: CoinGlass
The large liquidation event could lead to a consolidation phase as traders reduce their leveraged positions, added Lee:
“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.”
Related: US Fed money printing could spur Bitcoin rally in Q1 2025 — Hayes
Bitcoin drop to $90,000 could happen before real rally begins
Bitcoin’s price may drop below the $90,000 level before embarking on a strong rally above $126,000, according to market analysts.
While Bitcoin’s long-term trajectory remains promising, BTC may need another correction to end this period of holiday illiquidity, according to John Glover, chief investment officer of Ledn and former managing director at Barclays.
Glover 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.”
BTC/USD, 1-day chart. Source: Rekt Capital
To avoid more downside, Bitcoin needs to hold above the $91,000 support, wrote popular crypto analyst Rekt Capital in a Jan. 8 X post:
“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.”
Still, analysts remain optimistic about Bitcoin’s price trajectory, with some expecting a cycle top above $150,000 in late 2025, driven by a predicted $20-trillion increase in the global money supply, which could attract $2 trillion of investment into BTC.
Related: Czech National Bank governor weighs Bitcoin for future reserve strategy