Bitcoin Faces Consolidation Amid Easing Hedge Fund Sell-Off

According to BlockBeats, Matrixport's recent weekly report suggests that the wave of Bitcoin sell-offs by hedge funds may be nearing its end. In recent weeks, both financing rates and benchmark interest rates have declined, and the Chicago Mercantile Exchange (CME) Bitcoin open interest has significantly reduced, indicating that the selling pressure has largely dissipated. However, Bitcoin remains in a consolidation phase and is unlikely to challenge new historical highs in the short term. The topping process for Bitcoin began in early December 2024, following stronger-than-expected U.S. employment data, which initially weakened the momentum of altcoins. Bitcoin peaked during the mid-December Federal Open Market Committee (FOMC) meeting. Despite attempts to rebound before U.S. President Donald Trump's inauguration on January 20, 2025, the collapse of Trump Meme coins led to a decline in the entire Meme coin bull market. These events contributed to the formation of tops in altcoins, Bitcoin, and the Meme market, pushing Bitcoin into its current consolidation phase. The Federal Reserve now plays a crucial role in determining whether Bitcoin will break out of this range or face a deeper adjustment. Since Trump's election in November 2024, a clear trend has emerged: wallets holding 100 to 1,000 Bitcoins (valued at approximately $8 million to $80 million) have become the dominant group. This may reflect the long-term accumulation of Bitcoin by family offices and wealth management institutions, especially as regulatory clarity improves. This structural shift is a key reason why extreme 70-80% retracements seen in past Bitcoin cycles are no longer expected. Although this week's Federal Reserve meeting was insufficient to trigger a significant rebound in Bitcoin and altcoins, it did mark a slight shift. Chairman Powell indicated that the Fed would "ignore" the recent rise in inflation expectations and does not believe Trump's tariffs will lead to sustained high inflation. The Fed will adopt a wait-and-see approach rather than responding to these inflation pressures with rate hikes. Despite lowered growth expectations, the Fed will tolerate temporary inflation risks. Combined with the slowdown in quantitative tightening, the tone of this meeting can be interpreted as mildly dovish, providing some downside support for Bitcoin and stocks. For the past three weeks, Bitcoin's price has remained below its 21-week moving average, indicating a bear market. Interestingly, in the summer of 2024, there were brief shifts between bullish and bearish signals. The 21-week moving average is a critical indicator, and as long as Bitcoin's closing price remains below $88,574, the market is considered bearish. A closing price above this level would signal a bullish stance.