Bitcoin may face short-term pressure as tightening global liquidity, following the Trump re-election, suggests a potential pause in price gains, analysts warn.
Crypto investors should get ready for a short-term slowdown as global liquidity tightens, Matrixport, Asia’s blockchain analysis hub, wrote in a Jan. 8 research note.
According to crypto analyst Markus Thielen, the tightening comes after a stronger U.S. dollar following the Trump re-election, and historically, shifts in global liquidity tend to affect Bitcoin’s (BTC) price about 13 weeks later. As liquidity tightens, Bitcoin could enter a consolidation phase, Thielen warns, noting that this usually happens when dollar-denominated liquidity weakens. Despite the dip, the analyst expects this phase to be short-lived.
“The broader outlook for risk assets, particularly Bitcoin, remains constructive,” says Thielen, noting that traders may act more cautiously when liquidity indicators are less favorable, as they’ve been reliable in the past. For now, Bitcoin could face some bumps, but the long-term picture remains positive.
The warning comes as spot Bitcoin exchange-traded funds saw a sharp drop in inflows on Jan. 7, after Bitcoin fell 5%, fueled by growing expectations of a more hawkish Federal Reserve.
As crypto.news reported earlier, BTC dropped nearly 6% on Jan. 7, weighed down by rising U.S. bond yields and caution among investors ahead of important economic updates. The rise in bond yields has sparked expectations of a tougher stance from the Federal Reserve, with officials signaling only two interest rate cuts in 2025, fewer than expected.