The potential for a Bitcoin rally, anticipated by many as Donald Trump’s return to the presidency on January 20 approaches, might face challenges later in the month. Market tensions could rise as the Federal Reserve announces its first interest rate decision of the year.
In a January 5 report, Markus Thielen, founder of financial research firm 10x Research, shared his projections for Bitcoin’s performance in January. According to Thielen, market dynamics will remain heavily influenced by inflation data and the U.S. Federal Reserve’s monetary policies.
Optimism from Inflation Data to Drive Early Gains
Thielen anticipates a strong start to January, fueled by optimism around the upcoming Consumer Price Index (CPI) inflation report, set to be released on January 15. A favorable CPI report could act as a catalyst for Bitcoin’s rally, coinciding with Trump’s inauguration.
However, Thielen warns of potential headwinds as the Federal Open Market Committee (FOMC) meeting scheduled for January 29 draws closer. The Federal Reserve’s policy communications remain a critical factor that could hinder Bitcoin’s upward trajectory.
Market Expectations and Bitcoin’s Volatility
According to CME Group’s FedWatch Tool, there is an 88.8% probability that the Federal Reserve will maintain interest rates between 4.25% and 4.50% after the FOMC meeting. This indicates market expectations for stable monetary policy.
Historically, Bitcoin has exhibited heightened volatility following FOMC decisions. For instance, after the December 18 meeting, Bitcoin’s value dropped by approximately 15% to $92,800 when the Federal Reserve announced it would reduce interest rates only twice in 2025, down from an earlier projection of five cuts.
Key Trends for January and Beyond
Thielen believes that while inflation is expected to decline throughout 2025, the Federal Reserve may be slow to adjust its policies. He also highlights the importance of institutional investor activity in shaping Bitcoin’s price trends.
Key factors to monitor include the issuance of stablecoins and inflows from Bitcoin Spot ETFs. Thielen projects that Bitcoin could reach a price range of $97,000 to $98,000 by the end of January.
Ethereum: A “Poor Investment” in 2025?
Thielen is less optimistic about Ethereum. In a December 30 report, he suggested that Ethereum could underperform Bitcoin during the anticipated 2025 bull market, labeling it a “poor medium-term investment.”
The report cites several challenges for Ethereum, including a lack of growth catalysts and a decline in active validators, which fell by 1% over the past month—a potential indicator of instability.
Thielen also noted that demand for Ethereum outside of staking appears insufficient to drive significant price increases. As a result, he advised investors to avoid the asset for now.
Bitcoin’s Record-Breaking Transaction Volumes in 2024
Meanwhile, Bitcoin achieved a major milestone in 2024, with its blockchain processing over $19 trillion in transactions, more than double the $8.7 trillion recorded in 2023. This marks a sharp recovery following two years of declining transaction volumes since the 2021 bull market peak of $47 trillion.
“The $19 trillion in transactions on Bitcoin’s blockchain in 2024 highlights its dual role as both a store of value and a medium of exchange,” said Pierre Rochard, VP of Research at Riot Platforms.
Spot ETFs and Halving Strengthen Bitcoin’s Position
Several milestones contributed to Bitcoin’s strong 2024 performance:
- Approval of a U.S. Bitcoin Spot ETF: This regulatory breakthrough bolstered institutional adoption.
- April 2024 Halving Event: This reduced Bitcoin’s mining rewards, increasing its scarcity.
- All-Time High Price: Bitcoin reached a historic high of approximately $108,000.
Network Security Reaches New Heights
On January 3, 2024, Bitcoin’s network security hit a record high with an unprecedented hashrate of 1,000 exahashes per second (EH/s). Although it later stabilized around 775 EH/s, this surge underscores the growing global commitment of miners.
Despite the concentration of mining pools in specific regions, tracing the precise control of the majority of hashrate remains challenging. The anonymity of mining, often obscured by VPNs, complicates efforts to determine its geographic origins.
Bitcoin’s Consolidating Role in Finance
The combination of increased transaction volumes, rising hashrate, and broader global adoption reinforces Bitcoin’s position as a premier store of value and a medium of exchange. While challenges persist, these trends underscore its resilience and potential for sustained growth in the evolving financial landscape.