Market analysts have issued a warning that Bitcoin may experience short-term pressure due to tightening global liquidity following the Trump re-election.

Global Liquidity Tightens: Impact on Bitcoin Price

Matrixport, Asia’s blockchain analysis hub, published a research note on January 8, advising crypto investors to prepare for a short-term slowdown as global liquidity tightens. According to crypto analyst Markus Thielen, the tightening of global liquidity is a result of a stronger US dollar following the Trump re-election. Historically, shifts in global liquidity tend to affect Bitcoin’s price approximately 13 weeks later.

Consolidation Phase: What to Expect

As liquidity tightens, Bitcoin could enter a consolidation phase, Thielen warns. This phase is often seen when dollar-denominated liquidity weakens. Despite the potential dip, the analyst expects this phase to be short-lived. Thielen notes, β€œThe broader outlook for risk assets, particularly Bitcoin, remains constructive.”

β€œTraders may act more cautiously when liquidity indicators are less favorable, as they’ve been reliable in the past.”

The warning comes as spot Bitcoin exchange-traded funds experienced a sharp drop in inflows on January 7, following a 5% decline in Bitcoin’s price. This decline was fueled by growing expectations of a more hawkish Federal Reserve.

Market Trends: Key Factors to Consider

Several key factors are influencing the current market trends, including:

  • Rising U.S. bond yields, sparking expectations of a tougher stance from the Federal Reserve
  • Officials signaling only two interest rate cuts in 2025, fewer than expected
  • Growing caution among investors ahead of important economic updates

Despite the potential short-term slowdown, the long-term outlook for Bitcoin remains positive. For the latest updates and news on the crypto market, continue reading on Global Crypto News.