Bitcoin’s price remains under pressure, with analysts predicting that the ongoing correction could extend until April. A new Matrixport analysis ties this decline to global liquidity factors and a strengthening U.S. dollar, which continues to exert downward pressure on the cryptocurrency market.
Macroeconomic Factors Driving Bitcoin’s Downturn
According to Matrixport, Bitcoin’s correction is largely driven by macroeconomic conditions. The rising strength of the U.S. dollar has reduced global liquidity, directly impacting Bitcoin’s price trajectory. Analysts note that liquidity peaked in late December 2024, leading to the current downturn.
“A stronger U.S. dollar causes this liquidity measure to decline, which suggests downward pressure on Bitcoin prices. Global liquidity peaking in late December 2024—driven by a surging U.S. dollar—provides a clear explanation for Bitcoin’s ongoing correction.” – Matrixport
Wall Street’s Growing Influence on Bitcoin
Another significant factor shaping Bitcoin’s movement is its increasing connection to traditional financial markets. Since the launch of spot Bitcoin exchange-traded funds (ETFs), institutional investors have played a larger role in Bitcoin’s price action.
Bitcoin ETFs have amassed $39 billion in inflows over 14 months, with hedge funds controlling approximately $10 billion of these holdings. Analysts point out that at least 25% of Bitcoin ETF capital is tied to arbitrage trades, which can contribute to market volatility. While long-term asset managers view Bitcoin as a store of value, hedge funds leverage short-term strategies that may exacerbate price swings.
Bitcoin’s Outlook: Recovery Possible After April
With Bitcoin’s growing ties to institutional finance, Matrixport analysts believe that its price correction will likely persist through March and April. However, once the correction stabilizes, they expect Bitcoin to attempt a recovery, potentially revisiting previous highs.
The coming months will be crucial in determining Bitcoin’s trajectory, as macroeconomic shifts and institutional investment trends continue to influence market dynamics. Investors will be closely watching the Federal Reserve’s policies, global liquidity trends, and ETF flows for further indicators of Bitcoin’s next move.
