As the world waits with bated breath for President-elect Donald Trump’s inauguration on January 20, market analysts are predicting a potential rally in the price of Bitcoin. However, according to a recent report by 10x Research, this upward momentum may wane towards the end of the month as the Federal Reserve publishes its first interest rate decision of the year.

A Positive Start Expected in Early January

In a January 5 report, 10x Research’s founder Markus Thielen predicted that Bitcoin would experience a "positive start" in early January. This optimism was fueled by the expectation of a favorable inflation print ahead of Consumer Price Index (CPI) data on January 15.

A Slight Pullback Ahead of CPI Data

Thielen noted that while a positive CPI result could reignite optimism and fuel a rally into Trump’s inauguration, this momentum may wane with the market likely retreating somewhat ahead of the Federal Open Market Committee (FOMC) meeting on January 29.

The Primary Risk Behind a Bitcoin Rally in 2025

According to Thielen, the primary risk behind a Bitcoin rally in 2025 is the Federal Reserve’s interest rate decision. The FOMC meeting on December 18 saw the Federal Reserve trim the number of projected interest rate cuts from five to two, causing Bitcoin to fall by nearly 15% to around $92,800.

Institutional Investors and Stablecoin Minting

Thielen also highlighted the importance of institutional investors returning to the crypto market as a key factor in determining the price of Bitcoin. This is reflected through stablecoin minting and spot Bitcoin exchange-traded fund (ETF) inflows.

A Conservative Estimate: $160,000 by Late 2025 or Early 2026

Meanwhile, Ledn’s chief investment officer, John Glover, provided a more conservative estimate for the price of Bitcoin. According to Glover, Bitcoin may pull back to $89,000 before rebounding and hitting $125,000 by the end of the first quarter. From there, Bitcoin may retrace to $100,000 once more before making an attack towards $160,000 in late 2025 or early 2026.

A Look at the Crypto Fear & Greed Index

Despite the bearish short-term outlooks, the Crypto Fear & Greed Index, which measures market sentiment for Bitcoin and other cryptocurrencies, returned to the ‘Extreme Greed’ zone with a score of 76 out of 100 on January 5 as Bitcoin increased to $98,850.

Why the Interest Rate Decision is Key

The Federal Reserve’s interest rate decision is a crucial factor in determining the price of Bitcoin. With the FOMC meeting scheduled for January 29, market analysts are closely watching the FedWatch tool, which currently shows an 88.8% chance that the US federal target rate will remain between 425 and 450 basis points following the meeting.

What to Expect Ahead of the FOMC Meeting

As we approach the FOMC meeting on January 29, market analysts are predicting a slight pullback in the price of Bitcoin. According to Thielen, this is due to the anticipation of lower inflation rates in 2025, although it may take some time for the Federal Reserve to recognize and respond to this shift formally.

A Potential Rally into Trump’s Inauguration

Despite the potential pullback ahead of the FOMC meeting, a favorable inflation print could reignite optimism and fuel a rally into Trump’s inauguration. Thielen noted that if the CPI data on January 15 shows a positive result, it could lead to a surge in investor confidence and push the price of Bitcoin upwards.

A Brief History of Interest Rate Decisions and Their Impact on Bitcoin

In the past, interest rate decisions by the Federal Reserve have had a significant impact on the price of Bitcoin. For instance, when the FOMC meeting on December 18 trimmed the number of projected interest rate cuts from five to two, Bitcoin fell by nearly 15% to around $92,800.

Conclusion

As we await the outcome of the FOMC meeting on January 29 and the interest rate decision, market analysts are predicting a potential rally in the price of Bitcoin. However, this momentum may wane ahead of the Federal Reserve’s announcement. According to Thielen, the key factors to watch out for include the pace at which institutional investors return to the crypto market, reflected through stablecoin minting and spot Bitcoin ETF inflows.

Related Articles

  • Bitcoin Needs Trading Volume Boost to Rally Above $105K in January
  • How Crypto Laws Are Changing Across the World in 2025

Sources:

  • 10x Research: Predictions for a positive start in early January and a potential rally into Trump’s inauguration.
  • Ledn: John Glover’s estimate of Bitcoin reaching $125,000 by the end of the first quarter and $160,000 by late 2025 or early 2026.
  • Alternative.me: Crypto Fear & Greed Index score.