Bitcoin dips on profit-taking

Bitcoin price dipped on Thursday, dropping from $97,600 to $95,900. The cryptocurrency had been trading in overbought territory and many market participants rushed to realize their gains. If BTC price declines, support can be found at $94,000, while resistance may be encountered at $100,000. 

Ethereum price gave up Wednesday’s gains on Thursday, dropping from $2,740 to $2,650. If Ethereum's price declines, it may encounter support near $2,500, while if it increases, resistance may be encountered near $2,900.

Bitcoin price registered a new all-time high of $109,880 in January but has since been under pressure by increased risk aversion sentiment. Most major cryptocurrencies are under pressure, on concerns that US President Donald Trump’s trade policies may start global trading wars. 

Trump has been using threats of imposing trade tariffs as a negotiation tool to further his agenda with other countries. The uncertainty over Trump’s future policies and trade tariffs is generating a risk aversion sentiment, putting pressure on crypto markets.

US President Donald Trump has been using threats of imposing trade tariffs as a negotiation tool to further his agenda with other countries. On Monday, Trump announced a 25% tariff on steel and aluminum imports for all countries importing into the US, raising concerns over global trade wars. 

Trump has threatened that he will announce reciprocal tariffs on many countries, which would raise US import taxes to match those imposed by the country’s other trading partners. On Thursday, Trump signed an order to his staff to develop custom tariffs for each country, stating “Whatever they charge us, we will charge them”. If Trump goes through with these heavy tariffs, global inflation is likely to rise and the economic outlook will worsen, thus promoting a risk aversion sentiment, which puts pressure on crypto markets.

Trump’s proposed plans for building a Bitcoin strategic reserve have been boosting Bitcoin price. Growing expectations that the US government will adopt a pro-crypto regulatory and fiscal policy are boosting crypto markets. 

Cryptocurrency prices are also affected by central banks’ interest rates. High interest rates stifle economic growth, putting pressure on crypto markets. The US Federal Reserve held interest rates steady at its January meeting, after delivering three consecutive rate cuts in 2024. FOMC policymakers voted unanimously to maintain the federal funds range to a target range of 4.25% to 4.50. 

US inflation data released this week were hotter than anticipated, indicating that inflationary pressures are on the rise and lowering Fed rate cut expectations. Headline inflation rose by 3.0% year-on-year in January after rising by 2.9% in December against expectations of a 2.9% print. Market odds of another rate cut dropped after the release of the US inflation report. Markets are pricing in only a single 25bps rate cut within the year as inflationary pressures remain high. 

Fed Chair Jerome Powell delivered a mildly hawkish message after the policy meeting. Powell stated that the Fed’s approach will remain data-driven and stressed that the central bank needs to consider potential policy changes under Trump’s administration. On Tuesday, Powell testified about the Semi-Annual Monetary Policy Report before the Senate Banking Committee. Powell’s speech was hawkish, hinting that the Fed may pause rate cuts for some time. Powell completed his two-day semiannual Monetary Policy Report on Wednesday, with a testimony before the House Financial Services Committee. Powell stressed that the battle against inflation is ongoing and stated that he does not intend to resign if asked to by Trump.

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ETH/USD 1h Chart

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Written by:
Myrsini Giannouli

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