Bitcoin Faces 10% Drop as Geopolitical Tensions and Fed Policy Weigh

Bitcoin is currently facing significant price pressures due to geopolitical tensions and macroeconomic uncertainties, with its price hovering near the critical $100,000 support level. Market participants are closely monitoring liquidity shifts and Federal Reserve policy signals, which could influence Bitcoin’s trajectory in the coming weeks. The recent dip to early May lows and a weekly close near $101,000 indicates increasing sell-side pressure around these support zones. Exchange order book data reveals that liquidity is gravitating towards the $95,000–$98,000 range, signaling potential for deeper retracements. While short-term holders have historically provided a safety net around these levels, rising pressure on newer investors—who largely hold unrealized losses—could exacerbate volatility. Market analysts emphasize that a retest of lower support levels near $92,000 is plausible, reflecting waning bullish momentum and increasing downside volume.

On-chain analytics firm highlights the Short-Term Holder Realized Price as a pivotal metric, representing the cost basis of investors holding Bitcoin for less than 155 days. Since April, this price level has consistently acted as a support during corrections. However, the diminishing unrealized gains among this cohort suggest a fragile foundation, potentially limiting buying power during downturns. This dynamic warrants close attention as it may influence the depth and duration of any forthcoming price corrections.

The recent escalation in the Israel-Iran conflict, including US military actions and Iran’s parliamentary decisions, initially triggered volatility across crypto, oil, and stock futures markets. However, the rapid normalization of price movements indicates that markets are not pricing in a prolonged conflict. The resilience suggests that Bitcoin’s price movements are currently more influenced by broader macroeconomic factors than by geopolitical events alone.

Analysts emphasize that the current environment is characterized by unprecedented levels of market noise, driven by a confluence of tariffs, geopolitical tensions, Federal Reserve policies, and inflation data. This complexity challenges traditional market signals, requiring investors to adopt a nuanced approach to risk assessment and portfolio management. The ability of Bitcoin and other assets to absorb such shocks without sustained declines may be indicative of evolving market maturity.

The upcoming release of the Personal Consumption Expenditures (PCE) index, the Federal Reserve’s preferred inflation measure, alongside Chair Jerome Powell’s congressional testimony, represents a critical juncture for Bitcoin. The Fed’s decision to maintain interest rates at 4.25%–4.50% contrasts with declining inflation trends, fueling political and market debate. This divergence places the Fed in a challenging position as it balances inflation control with economic growth. Market participants anticipate that these macroeconomic signals will significantly influence Bitcoin’s price action, given its sensitivity to interest rate expectations and risk sentiment.

Trading firm highlights that the US policy rate remains substantially higher than those of other developed economies and nearly double the current consumer inflation rate. This disparity may impact capital flows and investor appetite for risk assets, including cryptocurrencies. The Fed’s future moves, informed by upcoming economic data, will be closely scrutinized for indications of policy shifts that could either bolster or undermine Bitcoin’s bullish case.

Bitcoin’s market dominance is nearing the 71% level, historically a critical inflection point preceding altcoin rallies. Despite altcoins experiencing significant market cap declines, analyst suggests that a reversal in Bitcoin dominance could trigger the long-anticipated “altseason.” This potential shift would realign market capital towards altcoins, offering diversification opportunities and renewed investor interest beyond Bitcoin. Monitoring dominance metrics alongside price action will be essential for anticipating broader market rotations.

Rekt Capital’s analysis underscores the cyclical nature of Bitcoin dominance, which typically rises during bull markets before retreating to facilitate altcoin growth phases. While the exact reversal point may vary, the proximity to historical highs suggests that market conditions are ripe for a transition. Investors should consider this dynamic when evaluating portfolio allocations and timing market entries.

On-chain analytics from CryptoQuant’s Bitcoin Yearly Percentage Trend (BYPT) tool projects a bullish 2025, aligning with Bitcoin’s four-year halving cycle. Historical data indicates a pattern of three years of expansion followed by one year of consolidation, with 2025 poised to deliver approximately 120% gains. This trajectory could propel Bitcoin prices beyond $200,000, reaffirming the structural rhythm that underpins its long-term growth. Such insights provide investors with a framework to contextualize short-term volatility within a broader cyclical narrative.

Contributor emphasizes the importance of distinguishing between daily market fluctuations and underlying cyclical forces. The BYPT tool aids in this process by smoothing out noise and highlighting consistent growth patterns. This approach enables investors to maintain strategic focus amid volatile conditions, reinforcing confidence in Bitcoin’s enduring value proposition.

Bitcoin’s near-term price action is being shaped by a complex interplay of liquidity dynamics, geopolitical developments, and macroeconomic policy signals. While risks of further declines exist, particularly with liquidity shifting towards lower support levels, the broader market structure and cyclical trends suggest resilience and potential for significant gains ahead. Investors should remain vigilant to Federal Reserve communications and geopolitical developments, while also monitoring Bitcoin dominance metrics for signs of altcoin market reactivation. Maintaining a balanced perspective grounded in data-driven analysis will be key to navigating the evolving crypto landscape.