Bitcoin battles $90K: Could the Fed's potential tightening be a catalyst for the next big rally?

Bitcoin (BTC), the leading cryptocurrency, is facing a turbulent start to 2025, battling to hold the $90,000 support level. After a brief surge past $100,000 earlier this year, Bitcoin has entered a correction phase, primarily influenced by macroeconomic pressures, including signals from the U.S. Federal Reserve.

The Fed’s role in bitcoin’s slide

The Federal Reserve’s tightening monetary policy has emerged as a key factor behind Bitcoin’s recent decline. Signs of economic resilience in the U.S. have delayed expectations for interest rate cuts, with the first reduction now projected for mid-2025, according to the CME Group’s FedWatch tool. 

Source: CME Group

The central bank’s hawkish stance continues to weigh heavily on risk assets like Bitcoin, with investors bracing for potentially higher rates for a prolonged period. The upcoming Federal Reserve meeting on January 29 is expected to maintain current rates, but traders remain cautious, given the Fed’s repeated emphasis on tackling sticky inflation. As a result, Bitcoin has struggled to reclaim the psychological $100,000 level, retreating sharply towards $90,000 in recent sessions.

Liquidations add pressure

Bitcoin’s price correction has triggered a wave of liquidations across the market. CoinGlass data shows over $400 million worth of leveraged long positions were wiped out within 24 hours as Bitcoin dipped to $92,500 earlier this week. 

Source: CoinGlass

Analysts suggest this liquidation event could usher in a period of consolidation as traders reduce their exposure to leverage.

The path ahead: Potential for recovery

While Bitcoin’s recent performance has rattled investor confidence, its long-term outlook remains promising. Market analysts anticipate that after navigating the current turbulence, Bitcoin could experience a strong rally later this year. Some projections even suggest a potential breakout to $126,000, contingent on favorable macroeconomic conditions and renewed investor sentiment.

Prominent crypto analyst Rekt Capital highlighted the importance of Bitcoin holding above $91,000 to avoid further downside. Failure to maintain this support could see Bitcoin test lower levels before any significant recovery. Popular crypto analyst Ali Martinez also added to a potential upside narrative, noting that on Jan. 6, with Bitcoin at $102,000, 56.59% of traders on Binance were shorting which led to 10% drawdown, sending $BTC down to $93,000. At the moment, 63.92% of traders on Binance are going long.

Adding complexity to Bitcoin’s outlook is the evolving geopolitical and institutional landscape. The incoming U.S. administration under President Donald Trump has fueled speculation about a more favorable regulatory environment for cryptocurrencies. Trump’s ambitious proposal to establish a U.S. Bitcoin's strategic reserve, along with the introduction of the BITCOIN Act by Senator Cynthia Lummis, has the potential to alter market dynamics significantly. 

However, skepticism remains regarding the feasibility of these initiatives, with analysts divided on their likelihood and impact. Internationally, competition is heating up, with countries like Russia reportedly considering the establishment of Bitcoin reserves. These developments could further position Bitcoin as a strategic financial asset, even as market volatility persists.

2025 outlook: A year of complexities and opportunities

Despite the rocky start, some experts maintain optimism for Bitcoin’s trajectory in 2025. HC Wainwright analyst Mike Colonnese predicts Bitcoin could reach $225,000 by year-end, driven by institutional adoption, wider ETF availability, and a favorable regulatory environment. However, this bullish outlook is tempered by the immediate challenges posed by macroeconomic pressures and market uncertainty.

Bitcoin’s battle at $90,000 underscores the delicate balance of factors shaping its price. With the Fed’s potential tightening a central theme, the coming months will be critical in determining whether Bitcoin can overcome these headwinds and reclaim its upward momentum. For now, the market remains cautious but hopeful for a potential rebound later in the year.

At the time of writing, BTC is currently battling the $92,000 price level. After a strong start to 2025, there is a strong sell bias on the daily chart. However, prices approaching the lower boundary of the bollinger bands and RSI flatlining at the midline, suggests that a sell-side slowdown could be on the cards. Sellers could find support at the $92,864 and the $91,521 price levels. If a strong bounce happens, buyers could find resistance at the $102,260 and the $106,126 price levels.

Source: Deriv MT5

As for now, you can speculate on BTC’s price with a Deriv MT5 account.  It offers a list of technical indicators that can be employed to analyse prices. Log in now to take advantage of the indicators, or sign up for a free demo account. The demo account comes with virtual funds so you can practise analysing trends risk-free. 

Disclaimer:

The information contained within this blog article is for educational purposes only and is not intended as financial or investment advice. We recommend you do your own research before making any trading decisions.

This information is considered accurate and correct at the date of publication. Changes in circumstances after the time of publication may impact the accuracy of the information.

The performance figures quoted refer to the past, and past performance is not a guarantee of future performance or a reliable guide to future performance.