Key Points

• Bitcoin may experience market choppiness in the medium term, according to Coinbase analysts.
• Increased BTC supply and a slow Fed rate cut path could limit Bitcoin’s upside momentum.

Coinbase analysts have issued a warning regarding potential market turbulence for Bitcoin (BTC) in the near future.

Factors Affecting Bitcoin

Analysts David Duong and David Han pointed to the slow pace of Federal Reserve rate cuts and an increasing supply of BTC in the market as potential issues.

The analysts noted that the overall macroeconomic landscape is mixed, with reduced chances of Fed rate cuts due to stronger employment data and inflation risks. This could impact the performance of risk assets in the short to medium term.

Recent economic data from the U.S. showing strong labor markets and persistent inflation has further lowered the likelihood of additional Fed rate cuts. Traders are currently predicting that the Fed will maintain the rate at 4.25%-4.50% for the upcoming FOMC meeting at the end of January.

Bitcoin Sell Pressure Increases

Duong and Han also highlighted a potential increase in BTC supply as a factor that could limit strong upward momentum for Bitcoin. The active supply of BTC has surged to 4.6 million, up from 2.7 million in October 2024.

The analysts’ report revealed that approximately $90 billion worth of BTC has been liquidated by long-term holders (LTH), with the $100k level identified as a key supply zone for early investors. This LTH supply pressure could potentially force BTC into a specific price range.

These supply-side dynamics indicate that Bitcoin could be headed for a period of consolidation in the coming months, similar to the onchain signals observed when Bitcoin breached all-time-highs in March 2024.

In the meantime, Bitcoin has swept the range lows and bounced back, but the recovery has stalled at $95k. This reinforces the $90k-$100k consolidation range suggested by the analysts.