Key Federal Reserve (Fed) data releases this week are shaping the landscape of the cryptocurrency market. With influential speeches from Fed Chair Jerome Powell and essential PCE inflation figures set to be announced Friday, traders are adjusting their strategies following significant market movement. A staggering $1.8 billion in crypto liquidations on Monday shook investor confidence, leaving many to brace for potential shifts in the Fed’s policy stance that could affect risk assets.
Analysts are currently divided regarding Bitcoin’s trajectory, with some predicting a possible retracement to $107K, while others suggest it may be gearing up for a breakout that could push it beyond $130K. The uncertainty in macroeconomic conditions is amplifying every price movement, making the immediate future of the world’s largest cryptocurrency even more unpredictable.
This week’s hawkish sentiment was underscored by remarks from St. Louis Fed President Alberto Musalem, who expressed concerns about further rate cuts beyond a recent 25 basis point reduction. Musalem pointed out that inflation still exceeds the Fed’s 2% target, despite apparent softening in the labor market. Adding to this cautious tone, Atlanta Fed President Bostic projected only one rate cut for 2025, with core inflation forecasted to remain at 3.1% and unemployment possibly climbing to 4.5% by year-end.
The marketplace reacted sharply, evidenced by a stronger dollar, rising Treasury yields, and a decline in expectations for a November rate cut. As Bitcoin slipped to approximately $111,800, it wiped out earlier weekly gains. The massive liquidation event saw more than 407,000 traders affected, pushing Bitcoin below $112,000 and Ether underneath $4,150, marking the most substantial sell-off in 2025.
Crypto equities faced downward pressure as well, with companies like MicroStrategy, Metaplanet, and Bitmine witnessing declines despite announcing new digital asset purchases. This trend reflects investor skepticism towards portfolio expansion amid pending clarity on both market direction and macroeconomic factors.
Shawn Young, Chief Analyst at MEXC Research, characterized Bitcoin’s current position as a critical inflection point, noting that sustained closes below $112,000 increase the risk of falling to the $107,000 support level, which bulls must defend to avoid a deeper retracement towards the crucial $100,000 mark. Young emphasized that, while the recent liquidations may cause short-term pain, they can contribute to healthy market rebalancing, with many participants viewing this as a potential buying opportunity rather than capitulation.
He anticipates that a sustained break above $117,000 would suggest that bulls are regaining control, paving the way for price discovery toward $130,000-$135,000 before the current cycle concludes.
Insight from Greg Magadini, Director of Derivatives at Amberdata, reinforces the view that the Fed remains focused on job markets while simultaneously keeping an eye on inflation and unemployment rates. Magadini noted that Powell’s recent comments exhibit considerable uncertainty regarding the current economic climate.
JPMorgan CEO Jamie Dimon echoed similar sentiments, suggesting that persistent inflation could hinder further Fed rate cuts, which runs contrary to market expectations for aggressive monetary easing through 2025.
From a technical analysis viewpoint, Bitcoin appears to be testing its trendline resistance around the $115,000-$116,000 mark, trading currently near $113,009. The cryptocurrency is in the process of navigating through a major descending trendline that has served as resistance since previous highs. The recent price pattern looks to form either a bullish flag or pennant after a rally, indicating that Bitcoin could be gearing up for a significant directional move.
If Bitcoin can successfully breach the descending trendline and surpass the $115,000-$116,000 resistance area with sufficient trading volume, it may target the next resistance zone between $120,000 and $123,000. However, should it fail to break this trendline, it may retrace towards support levels around $107,000-$108, potentially aligning with earlier consolidation patterns.
