Analysts have identified stagflation as the main concern for Bitcoin price projections in 2025, despite the upcoming release of initial jobless claims on January 2nd. A recent Kobeissi Letter stated that investors are worried about a repeat of the inflation situation in the 1970s, as the Federal Reserve cuts interest rates due to a weak labor market while inflation rises. Although the Federal Reserve has not yet acknowledged the beginning of stagflation, there is a possibility of seeing inflation rates of over 4% next year.
This potential stagflation scenario, characterized by high inflation and stagnant economic growth, could have a significant impact on Bitcoin’s performance. While Bitcoin has historically been considered a hedge against inflation, its correlation with traditional markets and sensitivity to macroeconomic conditions may introduce volatility. Stagflation is expected to become the main theme in 2025, with 55% of high net worth investors anticipating its occurrence, according to a survey by Bank of America.
The current phase in Bitcoin’s bull market is critical, as it has experienced a 15% correction in the past week without finding a definitive floor. However, this drawdown is relatively low compared to previous cycles, according to Glassnode data. Glassnode suggests that short-term holders (STHs) can indicate when the market might rebound. The Market Value to Realized Value (MVRV) metric, which compares STH supply in profit to that in loss, suggests potential seller exhaustion as it approaches the break-even point.
Glassnode considers MVRV to be a reliable indicator of “local bottoms in bull markets and local tops in bear markets.” The last time the Point-In-Time Short-Term Holder (STH) Profit/Loss Ratio fell below 1 was in early October when BTC/USD traded at $60,000. A recent Maxiport report also supports a bullish sentiment, stating that Bitcoin has matured in this cycle and is better equipped to handle volatility due to increased adoption and institutional support.
The market dynamics are shifting, with Bitcoin’s growing base of dip buyers and institutional support reducing the likelihood of severe corrections typically seen in previous cycles. Considering these indicators, Bitcoin’s resilience in the face of current macroeconomic uncertainties demonstrates its potential to navigate through this critical phase.
Disclaimer: Cryptocurrency is a high-risk asset class, and this article is provided for informational purposes only and does not constitute investment advice. There is a possibility of losing all of your capital.
