Bitcoin's January Outlook Amid Federal Reserve Decisions
According to Cointelegraph, a Bitcoin rally led by former President Donald Trump is anticipated to occur in the days leading up to his January 20 inauguration. However, this momentum might diminish towards the end of the month as the Federal Reserve is set to announce its first interest rate decision of the new year. Markus Thielen, founder of 10x Research, forecasts a "positive start" in early January, followed by a slight pullback before the release of Consumer Price Index (CPI) inflation data on January 15. Thielen suggests that a favorable CPI result could reignite optimism, potentially fueling a rally into Trump's inauguration. Nonetheless, he warns that this momentum may wane, with the market likely retreating ahead of the Federal Open Market Committee (FOMC) meeting on January 29.
The CME Group’s FedWatch tool indicates an 88.8% probability that the US federal target rate will remain between 425 and 450 basis points following the FOMC’s January 29 meeting. Previously, Bitcoin experienced a nearly 15% drop to around $92,800 after the FOMC meeting on December 18, where the number of projected interest rate cuts for 2025 was reduced from five to two. Thielen identifies the Federal Reserve's communication as the "primary risk" to a Bitcoin rally in 2025, noting that while lower inflation is anticipated this year, it may take time for the Federal Reserve to formally acknowledge and respond to this shift. Another significant factor will be the pace at which institutional investors return to the crypto market, as reflected through stablecoin minting and spot Bitcoin exchange-traded fund inflows.
Thielen projects Bitcoin to be in the $97,000 to $98,000 range by the end of January. Meanwhile, John Glover, chief investment officer at crypto lending firm Ledn, predicts Bitcoin could pull back to $89,000 before rebounding to $125,000 by the end of the first quarter. Glover further anticipates that Bitcoin may retrace to $100,000 before making a push towards $160,000 in late 2025 or early 2026. His $160,000 estimate is more conservative compared to the $180,000 and $200,000 predictions by asset management firms VanEck and Bitwise. Despite the bearish short-term outlooks, the Crypto Fear and Greed Index, which gauges market sentiment for Bitcoin and other cryptocurrencies, returned to the "Extreme Greed" zone with a score of 76 out of 100 on January 5 as Bitcoin rose to $98,850. It had previously exited the Extreme Greed zone on December 27, 2024, remaining in the "greed" zone for the last ten days.