Bitcoin Dips Below $90K Amid Fed Uncertainties and Low Liquidity: Insights from Analysts

Bitcoin Dips Below $90K Amid Fed Uncertainties and Low Liquidity: Insights from Analysts

Bitcoin has recently slipped below the $90,000 mark, marking a significant drop from its peak of nearly $120,000. This decline comes as investors face uncertain macroeconomic signals and varying liquidity conditions.

Key Takeaways:

Bitcoin's price dropped below $90,000 due to uncertainty surrounding the Federal Reserve and restricted liquidity, keeping investors on edge.
High interest rates and rising yields are limiting institutional interest in Bitcoin.
While exchange reserves are low, indicating confidence among holders, analysts predict consolidation rather than a breakout.

Market analyst Linh Tran from XS.com indicated that Bitcoin's recent price movements highlight the market's responsiveness to expectations around monetary policy rather than just broader economic indicators.

Despite a decrease in US inflation from last year’s peaks, the latest consumer price index stands at 2.7%, indicating that the disinflation process is progressing slowly and unevenly. Tran noted that this scenario compels the Federal Reserve to adopt a cautious position, affecting their ability to shift quickly towards aggressive easing.

High Interest Rates Maintaining Caution Among Institutional Investors

Elevated interest rates continue to influence the capital costs, making speculative assets like Bitcoin less appealing. Tran pointed out that Bitcoin often reacts based on anticipated liquidity conditions. Without strong indications of a forthcoming sustained easing cycle, institutional investors are likely to proceed with caution or remain on the sidelines.

"As long as there’s no clear expectation that the Fed will introduce significant rate cuts, large flows of capital may continue to hang back or engage only selectively,” she explained.

The strength of the US dollar and increasing Treasury yields have further intensified this pressure. The dollar index has shown gains over several trading sessions, while the yield on the 10-year US Treasury has approached a three-month peak around 4.17%.

Typically, higher real yields lessen the attraction of non-yielding assets such as Bitcoin, especially for institutions that adhere to stringent allocation guidelines.

The emergence of spot Bitcoin exchange-traded funds (ETFs) has dramatically shifted market dynamics. While ETFs have improved accessibility and bolstered institutional participation in the cryptocurrency market, they have simultaneously connected Bitcoin more closely with traditional financial flows.

"On a long-term basis, the increasing participation of significant financial institutions—ranging from asset managers to banks—continues to solidify Bitcoin’s standing as a more institutionalized asset, which is markedly different from previous market cycles," Tran stated.

Low Exchange Reserves Indicate Confidence Among Holders

On-chain data reveals that long-term holders are still active, with exchange reserves remaining relatively low.

Recently, K33 reported that the enduring sell-side pressure from long-term holders may be nearing its limits after years of gradual distribution.

Nevertheless, Tran warned that this does not ensure immediate price gains. Some long-term holders have cashed in profits following prior rallies, while others maintain Bitcoin as a strategic part of their portfolios.

She concluded that Bitcoin's next significant movement is likely to rely on more explicit signals regarding monetary easing and a more favorable liquidity landscape.

"In my opinion, the market will likely continue oscillating within a broad range, looking to re-accumulate while waiting for new catalysts—whether through a resurgence of institutional inflows or an improved macroeconomic outlook," she remarked.

As noted, gold prices have surged to a record high of $4,383.73 per ounce, driven by expectations of rate cuts, safe-haven demand, and a weakening dollar. Silver has also reached a record high, contributing to a strong rally that positions the metal as one of the standout trades of 2025.