The start of 2025 has been turbulent for Bitcoin, with a bearish outlook dominating the market. According to Matrixport’s latest report, global liquidity trends and macroeconomic challenges could lead the cryptocurrency into a consolidation phase. The Federal Reserve’s increasingly hawkish policies appear to be a key factor influencing Bitcoin’s near-term price trajectory.
Fed’s Hawkish Stance Limits Bitcoin Growth
The Federal Reserve’s monetary policy remains a dominant influence on Bitcoin’s price action. The hawkish tone observed during the December Federal Open Market Committee (FOMC) meeting has cast a shadow over Bitcoin’s potential for another significant rally. Historical patterns indicate that Bitcoin performs better under a dovish Fed stance, which fosters greater liquidity and investor confidence.
Earlier in 2024, Bitcoin’s rally began when the Fed signaled a dovish turn in January. However, the absence of rate cuts in March led to a six-month consolidation period. It wasn’t until Q4, when the Fed reverted to a dovish tone, that Bitcoin experienced another surge. The current policy environment, marked by caution and indecision, could lead to a similar phase of limited growth for the cryptocurrency.
ETF Inflows Stagnate Amid Market Uncertainty
Bitcoin Exchange-Traded Funds (ETFs) have seen record-breaking inflows, with a cumulative $35.9 billion recorded by December 2024. However, the momentum has stalled following the Fed’s hawkish policy signals. Investors appear hesitant to commit additional capital, awaiting more clarity on the Fed’s long-term plans.
Matrixport’s report suggests that Bitcoin’s price movements typically lag behind liquidity trends by approximately 13 weeks. This means any shift in market sentiment or policy decisions could take time to reflect in Bitcoin’s price action, further solidifying the likelihood of a consolidation phase in the coming weeks.
Price Consolidation Expected After Recent Decline
The first week of 2025 saw Bitcoin’s price drop sharply from $102,431 to $91,215, with a modest recovery to $95,000. Despite this rebound, the weekly candle is expected to close bearish, supporting the narrative of a consolidation phase.
Price consolidation at current levels could see Bitcoin move sideways for an extended period. This trend aligns with Matrixport’s analysis, which highlights the interplay between macroeconomic challenges and subdued ETF inflows as critical factors influencing the cryptocurrency’s short-term performance.
Options Strategies for Mitigating Risk
Matrixport advises traders to consider options strategies to manage risk effectively during this period of uncertainty. Call and put options can serve as cost-efficient tools to safeguard gains while maintaining exposure to potential market movements. These strategies allow investors to stay prepared for volatility without committing to significant market positions.
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