The Bitcoin price is experiencing a notable downturn, slipping below key psychological levels amid growing macroeconomic uncertainty and shifting market sentiment. As of the latest update, BTC is trading around $103,820 — a 2.5% drop from recent highs — with over $71 million in liquidations recorded in the past 24 hours. This pullback follows the Federal Reserve's recent 25 basis point rate cut, which failed to spark optimism due to a hawkish monetary policy outlook for 2025. Let’s explore the key factors driving this correction and what it could mean for Bitcoin’s near-term trajectory.
Fed Rate Cut Sparks Sell-Off Despite Market Expectations
Just hours before the Federal Open Market Committee (FOMC) meeting, market participants widely anticipated a 25 basis point rate cut — a move now priced in by traders. However, the Fed’s post-decision tone revealed a more cautious stance than expected. With inflation still above target at 2.8% (up from 2.4% in September), Chair Jerome Powell signaled fewer rate cuts in 2025 — potentially reducing the forecast from four to just three.
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This pivot toward a more restrictive monetary policy has rattled both traditional and digital asset markets. The S&P 500 posted its largest single-day drop since November 22, while Bitcoin tumbled below $104,000 and briefly dipped under $100,000. Analysts interpret this as a sign that markets are adjusting to the reality of prolonged higher interest rates, which typically reduce risk appetite and capital flow into volatile assets like cryptocurrencies.
Kurt S. Altrichter, founder of Ivory Hill Wealth, emphasized that the real story wasn’t the rate cut itself, but the Fed’s forward guidance:
“Tomorrow’s Fed meeting isn’t just about the expected rate cut — it’s about how committed the Fed remains to rate cuts in 2025. More cuts = better for stocks and bonds. Fewer cuts = markets adjust expectations.”
Technical Breakdown: Head-and-Shoulders Pattern Triggers Bearish Outlook
From a technical perspective, Bitcoin has broken down below a critical head-and-shoulders pattern — a classic bearish reversal formation. According to Ali Charts, this pattern suggests a potential downside target near $99,000 unless BTC regains momentum and clears the $105,000 resistance level.
The breakdown occurred during Asian trading hours, where strong selling pressure pushed prices lower ahead of the U.S. session. This region often sets early momentum, especially when global investors await major macroeconomic announcements.
Crypto analyst Rekt Capital points out that historical cycles support a short-term correction:
- In 2013, Bitcoin pulled back in Week 7 of price discovery.
- In 2017, a 34% retracement occurred in Week 8.
- In 2021, BTC declined by 16% in Week 6.
Given that Bitcoin is now entering Week 7 of its current cycle, a pullback aligns with past behavior. These corrections, though sharp, are considered healthy within bull markets — often wiping out leveraged long positions and resetting momentum for the next leg up.
Ali Martinez echoes this sentiment, predicting tiered corrections at higher price milestones:
“If Bitcoin behaves like in 2017 and 2020, then there will be a brief correction after reaching $110,000, a steep correction after hitting $125,000, a big correction at $150,000, and the end of the bull market at $220,000!”
On-Chain Data Reveals Profit-Taking by Short-Term Holders
On-chain metrics further confirm profit-taking activity across the network. Santiment data shows that holders who acquired Bitcoin between 90 to 365 days ago — many of whom bought during the $60K–$90K range — have been actively selling as prices surpassed $100,000.
In contrast, long-term holders (those owning BTC for over a year) have remained relatively inactive above $100K, indicating strong conviction and minimal supply pressure from this cohort. This divergence suggests that while short-term traders are cashing in gains, core investors continue to accumulate or hold through volatility.
ETF Flows Show Mixed Signals Amid Market Volatility
Spot Bitcoin ETFs also reflect divided investor sentiment. On Tuesday, major issuers like Fidelity (FBTC), Grayscale (GBTC), and Bitwise (BITB) reported net outflows — signaling retail and institutional caution. However, BlackRock’s IBIT saw massive inflows of $741 million, driving total ETF flows to a positive $493 million for the day.
This imbalance highlights that while some investors are pulling back amid uncertainty, others see the dip as a buying opportunity — particularly large institutions backing BlackRock’s fund.
Market Turbulence Expected Around January 20 Inauguration
Adding to near-term volatility, BitMEX co-founder Arthur Hayes has warned of significant market turbulence around January 20 — the date of Donald Trump’s presidential inauguration. While political commentary is avoided here per guidelines, Hayes’ prediction centers on potential policy uncertainty and its impact on financial markets broadly.
Hayes’ Maelstrom investment fund plans to de-risk ahead of this event, suggesting caution for leveraged positions in both crypto and equities.
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Key Support and Resistance Levels to Watch
As of now, Bitcoin’s immediate support lies at $99,000 — derived from technical patterns and prior consolidation zones. A break below could accelerate selling toward $95,000–$97,000. Conversely, reclaiming $105,000 would invalidate the bearish head-and-shoulders setup and reignite bullish momentum toward $110,000 and beyond.
Daily trading volume has dipped by 10%, indicating reduced participation during this correction — typical during consolidation phases following sharp moves.
Frequently Asked Questions (FAQ)
Q: Why did Bitcoin drop after the Fed rate cut?
A: Despite a 25 basis point cut being implemented, the Fed signaled fewer rate cuts in 2025 due to persistent inflation. This hawkish outlook reduced risk appetite, triggering sell-offs in both equities and crypto markets.
Q: Is the Bitcoin bull market over?
A: Not necessarily. Historical cycles show that pullbacks during early bull phases are normal. Analysts expect continued volatility but maintain long-term bullish targets between $150,000 and $220,000.
Q: What is causing the high liquidations in crypto?
A: Over $800 million in total liquidations occurred due to leveraged long positions being wiped out during rapid price declines. High leverage amplifies losses during sudden market shifts.
Q: Are long-term Bitcoin holders selling?
A: No. On-chain data shows that long-term holders remain inactive above $100K. The selling pressure comes primarily from short-term holders booking profits.
Q: Can Bitcoin recover to $110K soon?
A: Yes — if BTC regains and holds above $105K, it could resume its upward trajectory. Market sentiment will depend on upcoming macroeconomic data and Fed commentary.
Q: How do ETF flows affect Bitcoin price?
A: Net inflows indicate institutional demand and can drive prices higher. While some ETFs saw outflows, BlackRock’s strong inflows helped stabilize overall sentiment.
While short-term volatility dominates headlines, the underlying narrative for Bitcoin remains tied to macroeconomic trends, adoption via ETFs, and long-term holder behavior. Corrections like these often present strategic entry points for investors aligned with the broader bull cycle.
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