A potential Bitcoin rally, anticipated to gain momentum ahead of Donald Trump’s January 20 inauguration, may face challenges later in the month as the Federal Reserve prepares its first interest rate decision of the year.
In a report published on January 5, Markus Thielen, founder of 10x Research, outlined his expectations for Bitcoin’s trajectory in January, noting that market dynamics remain tightly linked to inflation data and Federal Reserve policies.
Thielen predicts a “positive start” to the month, bolstered by optimism ahead of the January 15 release of the Consumer Price Index (CPI) inflation data.
Favorable CPI Could Strengthen Bitcoin Rally
A favorable CPI report could strengthen Bitcoin’s rally, leading into Trump’s inauguration.
However, Thielen cautions that this momentum might falter as the Federal Open Market Committee (FOMC) meeting on January 29 approaches.
He highlighted that Federal Reserve communications remain the “primary risk” to a sustained Bitcoin rally in 2025.
The CME Group’s FedWatch tool currently indicates an 88.8% probability that the Federal Reserve will keep its target rate between 425 and 450 basis points following the FOMC meeting.
Bitcoin’s history with FOMC decisions has been volatile; the cryptocurrency fell nearly 15% to $92,800 after the December 18 meeting, when the Fed reduced its forecasted 2025 rate cuts from five to two.
Thielen anticipates that while inflation is likely to decline in 2025, the Federal Reserve may take time to adjust its policies accordingly.
Institutional investor activity will also play a significant role in shaping Bitcoin’s market.
According to Thielen, indicators like stablecoin issuance and spot Bitcoin exchange-traded fund (ETF) inflows will be key metrics to monitor.
He forecasts Bitcoin’s price to hover between $97,000 and $98,000 by the end of January.
Ethereum to Perform Poorly in 2025
Last week, Thielen raised doubts about Ethereum’s potential during the anticipated 2025 bull market, predicting the cryptocurrency might lag behind Bitcoin in delivering returns.
In a December 30 market report, Thielen described Ethereum as a “poor medium-term investment,” citing concerns about its lack of meaningful catalysts and a declining growth rate in active validators.
Over the past 30 days, the number of active validators has decreased by approximately 1%, signaling potential instability.
Thielen also noted that Ethereum’s demand outside staking appears insufficient to support significant price rallies, advising investors to “avoid” the asset for now.
It is worth noting that the Bitcoin network finalized over $19 trillion in transactions in 2024, more than doubling the $8.7 trillion settled in 2023.
As reported, the surge marks a significant reversal following two years of declining transaction volumes since 2021.
During the 2021 bull market, Bitcoin’s transaction volume peaked at $47 trillion but plummeted sharply in the subsequent years.
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