Bitcoin: The Fed sows doubt and causes the market to fall!

The year 2025 begins with instability for the crypto market. After briefly exceeding the symbolic threshold of $100,000 on January 7, bitcoin underwent a spectacular reversal, falling to $92,500 in the space of a few hours. This sudden decline cannot be explained by a technical factor, but by major macroeconomic elements. Investors carefully scrutinize the monetary policy of the American Federal Reserve (Fed), whose decisions directly influence financial markets. Until now, many expected a drop in interest rates as early as the first quarter of 2025. However, the latest economic data in the United States indicates more robust growth than expected, which calls this assumption into question. As a result, markets are reassessing their expectations and adjusting their positions. This uncertainty caused a wave of liquidations which dragged bitcoin down.

A market on alert in the face of Fed decisions

For several weeks, the evolution of American monetary policy has weighed heavily on the financial markets, in particular on cryptos. Initially, many investors were hoping for a drop in interest rates as early as the first quarter of 2025, a prospect that would have supported bitcoin's bullish momentum. However, the latest economic indicators published in the United States show an economy more resilient than expected. Such an observation calls into question the hypothesis of a rapid easing of monetary policy and pushes the Federal Reserve (Fed) to consider maintaining high rates for a prolonged period.

This revaluation had an immediate impact on the markets. Ryan Lee, chief analyst at Bitget Research, points out that “strong U.S. economic data suggests the Fed may keep rates high for longer than expected, directly weighing on risk assets like bitcoin.” The announcement of this prospect led to a massive wave of liquidations, with more than $631 million in long positions liquidated in just 24 hours, according to CoinGlass data.

In this context, investors' expectations have evolved. While they were counting on a first rate cut as early as March 2025, projections from the CME Group's FedWatch Tool now indicate that the Fed could wait until June 2025 before initiating monetary easing. This uncertainty quickly affected bitcoin, whose price slipped below $92,500 before a weak rebound on January 9 to $93,000, which constitutes one of the most significant corrections in several weeks.

The entire crypto market suffered the consequences of this movement. Thus, the decline in bitcoin led to a domino effect on other cryptos, with an amplification of the correction, which once again illustrates the strong correlation between macroeconomic decisions and the risk asset sector. This situation questions the market's ability to bounce back in the face of an increasingly restrictive economic environment.

Towards a new correction or an imminent rebound?

Although this correction has affected investor confidence, several observers believe that it does not call into question the long-term upward trend. According to John Glover, Ledn's chief investment officer and former Barclays executive, this drop could even be a necessary step before new momentum. “We could test the $90,000 zone before seeing a significant move above $126,000,” he says. His analysis is based on Elliott Wave Theory, a model that suggests that bitcoin is currently going through a fourth corrective wave, potentially heralding a future bullish impulse.

Other technical indicators support this perspective. Rekt Capital, a crypto analyst followed by many investors, warns of the importance of the $91,000 threshold, which represents major support to avoid a deeper decline. In a publication on the X platform (formerly Twitter) on January 8, 2025, he precise that “bitcoin lost support at $101,165 and found itself back in the $91,000 to $101,165 range.” A rebound at this level could signal the end of the correction phase and begin a gradual return to higher levels.

Beyond technical analysis, some investors remain confident in the upward potential of bitcoin in the medium term. The projection of a $20 trillion increase in the global money supply could inject up to $2 trillion into the bitcoin market, thereby boosting demand. However, reliance on Federal Reserve decisions will continue to dictate the pace of the market. If American monetary policy becomes more flexible in the coming months, bitcoin could return to more favorable dynamics and continue its rise.

While the market endures this correction, some observers maintain an optimistic view on the evolution of bitcoin. In the long term, an increase in the global money supply and a possible return of institutional flows could stimulate a new phase of growth. However, current volatility highlights the major influence of Federal Reserve decisions on risk assets. If the Fed opts to maintain its restrictive monetary policy for an extended period, bitcoin could remain under pressure. On the other hand, an easing of interest rates in the coming months would provide a more favorable context for a recovery. In this climate of uncertainty, the market oscillates between consolidation and anticipation of a new peak, which suggests a very tense start to the year.