Bitcoin’s outlook faces challenges amid a stronger dollar, according to Matrixport

Bitcoin’s outlook faces challenges amid a strengthening U.S. dollar and tightening global liquidity, according to Matrixport, a leading blockchain analysis hub in Asia. In a research note published on January 8, crypto analyst Markus Thielen highlighted that Bitcoin might experience short-term pressure due to these factors, especially following the re-election of Donald Trump. The resulting stronger dollar could lead to a reduction in liquidity, which historically impacts Bitcoin’s price after approximately 13 weeks.

Thielen pointed out that as liquidity tightens, Bitcoin could enter a consolidation phase, typically observed when dollar-denominated liquidity weakens. Despite these short-term concerns, he remains optimistic about Bitcoin’s long-term prospects, noting that the broader outlook for risk assets, including Bitcoin, is still favorable. In the short term, however, traders may adopt a more cautious approach, especially as liquidity conditions are less favorable than they have been in the past.

The warning comes in the context of a decline in Bitcoin spot exchange-traded fund (ETF) inflows on January 7, when Bitcoin experienced a nearly 6% drop. This decline was fueled by rising U.S. bond yields, which have raised expectations of a more hawkish stance from the Federal Reserve. Investors are also bracing for important economic updates, with the Federal Reserve signaling that it expects fewer interest rate cuts in 2025 than previously anticipated.

While Bitcoin faces some bumps in the short term, the long-term outlook remains positive, with Thielen indicating that any consolidation phase is expected to be brief. The ongoing developments in the broader macroeconomic environment, including bond yields and liquidity conditions, will likely continue to influence Bitcoin’s price movements in the near future.