Crypto Investors Eye Recovery Amid Fed Rate Speculation

The cryptocurrency market stumbled into 2025 with a shaky start as Bitcoin briefly dropped below $90,000, its sharpest decline since the beginning of the year.

The downturn is linked to uncertainty surrounding the Federal Reserve’s monetary policy and fears of reduced liquidity.

Market jitters intensified after Federal Reserve Chair Jerome Powell hinted at adopting a more hawkish stance due to rising inflation risks. Speculation about a halt in interest rate cuts has dampened investor sentiment, with Barchart estimating a 95% chance that current rates of 4.25%-4.5% will hold steady. This uncertainty has weighed heavily on digital assets, curbing risk appetite across the board.

Bitcoin, currently trading at $94,822, has seen a 6.8% decline over the past week and a 12.3% drop from its December 2024 peak of around $108,000. Despite this, President-elect Donald Trump’s pro-crypto agenda, including plans for a national Bitcoin reserve, has fueled optimism. Trump’s inauguration on January 20 is viewed as a potential turning point for the market.

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Major players in the crypto space remain confident. MicroStrategy, for instance, recently added 2,530 BTC to its reserves, bringing its total holdings to 450,000 BTC valued at $42.74 billion. Meanwhile, experts like Alice Liu from CoinMarketCap predict the market will recover, with 2025 marking a significant year for crypto adoption.

While technical analysts warn of potential downside risks with Bitcoin’s next support level at $87,500, the overall sentiment suggests that the market’s long-term trajectory remains bullish. Investors are cautiously navigating current challenges, anticipating a rebound as regulatory and economic conditions evolve.

Alexander Stefanov