Analysts forecast potential short-term pressure on Bitcoin amid tightening global liquidity following Donald Trump's re-election.
Impact of Global Liquidity on Bitcoin
According to Matrixport, a blockchain analysis hub in Asia, short-term slowdowns are to be expected as global liquidity tightens. Analyst Markus Thielen explains that the tightening is due to a stronger U.S. dollar post Trump's re-election. Historically, shifts in global liquidity tend to affect Bitcoin's price about 13 weeks later.
Bitcoin Consolidation and Risk Asset Market
Thielen warns that as liquidity tightens, Bitcoin could enter a consolidation phase. He notes that this usually occurs when dollar-denominated liquidity weakens. However, the analyst expects this phase to be short-lived. The broader outlook for risk assets, especially Bitcoin, remains constructive, even if traders act more cautiously when liquidity indicators are less favorable.
Reaction to Bitcoin's Drop and Investor Expectations
The warning came as spot Bitcoin exchange-traded funds saw a sharp drop in inflows on January 7, after Bitcoin fell 5%. This was driven by growing expectations of a more hawkish Federal Reserve amid rising U.S. bond yields. Federal Reserve officials have signaled only two interest rate cuts in 2025, fewer than previously expected.
While Bitcoin may face short-term pressure, the overall outlook remains favorable. Investors should brace for temporary adjustments amid global economic shifts.
