According to analysts at Coinbase, Bitcoin (BTC) might encounter volatility in the near future. In their weekly report, David Duong and David Han highlighted the gradual pace of Fed rate cuts and the increasing BTC supply as contributing factors.
“The overall macroeconomic situation presents a mixed picture. With the reduced likelihood of Fed rate cuts due to robust employment figures and inflation concerns, the performance of risky assets could be subdued in the short to medium term.”
Recent economic data from the U.S has shown persistent inflation and a robust labor market, dampening expectations for further Fed rate reductions.
Market participants are currently pricing in the expectation that the Fed will maintain the interest rate at 4.25%-4.50% during the upcoming FOMC meeting at the end of January.
Rising Bearish Pressure on BTC
The analysts also pointed out that the increasing BTC supply could act as a barrier to significant upward momentum on the price charts.
“We believe that the supply dynamics of bitcoin could hinder upside potential in the short term. The active supply of BTC (transferred on-chain within the past three months) has surged to 4.6 million, up from 2.7 million in October 2024.”
As per the report, long-term holders (LTH) have liquidated nearly $90 billion worth of BTC, identifying the $100k level as a crucial area of supply for early adopters. The analysts posit that this supply pressure from LTH could confine BTC within a specific price range.
“These factors on the supply side suggest that Bitcoin may undergo a phase of consolidating price action in the coming months, akin to the signals observed on-chain when Bitcoin surpassed all-time highs in March 2024.”
Throughout this period, BTC dipped below the range’s lower boundaries before rebounding, yet the recovery was halted around $95k. This development evidently aligns with the consolidation range of $90k-$100k outlined in the analysts’ assessment.