Bitcoin's Rally and Fed Easing: A Strategic Entry Point for 2025?

The cryptocurrency market has long been a barometer for macroeconomic shifts, with Bitcoin (BTC) often serving as a proxy for risk appetite and liquidity dynamics. As 2025 draws to a close, Bitcoin's price has plunged below $90,000-its lowest level since April 2025-erasing all gains for the year and signaling the onset of a bear market. This decline coincides with a pivotal shift in Federal Reserve policy, as the central bank moves to end its quantitative tightening (QT) program and signals a dovish pivot. For investors, the question looms: Is this a strategic entry point for Bitcoin, or a warning sign of deeper corrections?

The Bear Market and Liquidity Pressures

Bitcoin's recent selloff has been driven by a confluence of factors, including outflows from exchange-traded products (ETPs), heightened volatility in repo markets, and a broader risk-off sentiment in global financial markets. The price drop below the 365-day moving average-a historically significant support level-has raised alarms among analysts, who now speculate that Bitcoin could test the $83,000–$84,000 range or even the $85,000–$90,000 zone. This breakdown underscores the fragility of Bitcoin's bull case in a tightening monetary environment, where real yields and dollar strength have historically curbed risk assets.

However, the Federal Reserve's policy trajectory may soon tilt the scales. In October 2025, the Fed announced its decision to conclude QT by December 1, 2025, effectively halting the reduction of its balance sheet and stabilizing it at around $6.25 trillion. This move, driven by evolving conditions in money markets and a shift toward "somewhat above ample" bank reserves, marks a departure from the aggressive tightening of 2022–2024. By injecting liquidity into the system, the Fed is creating a more accommodative backdrop for risk assets, including Bitcoin.

Historical Correlations: Fed Easing and Bitcoin Rallies

The interplay between Fed policy and Bitcoin's price performance is not new. During the 2020–2021 easing cycle, Bitcoin surged from under $10,000 to record highs, driven by near-zero interest rates and massive quantitative easing (QE) programs. Academic analyses highlight that Bitcoin's price is more responsive to global liquidity and real yields than to inflation itself, behaving as a liquidity-sensitive asset. When the Fed cuts rates, the U.S. dollar weakens, making Bitcoin an attractive hedge against currency devaluation.

This historical pattern appears to be repeating in 2025. A 25-basis-point rate cut in October 2025, which brought the federal funds rate to 3.75%–4.00%, injected fresh liquidity into markets and weakened the dollar. Analysts like Julio Moreno of CryptoQuant argue that such cuts could catalyze a rally in Bitcoin, particularly if the Fed follows through with additional easing in 2026. The transition from QT to QE, expected by January 2026, further amplifies this narrative, as liquidity injections are likely to bolster risk assets and real estate markets.

Strategic Entry Point: Balancing Risks and Opportunities

While the Fed's dovish pivot creates a favorable environment for Bitcoin, investors must weigh several risks. First, the market's reaction to the September 2025 rate cut was muted, with Bitcoin trading flat in the immediate aftermath as the move was widely anticipated. This suggests that further rate cuts may need to exceed market expectations to drive meaningful price action. Second, Bitcoin's correlation with tech stocks and broader risk assets means it remains vulnerable to macroeconomic shocks, such as a U.S. recession or a surge in inflation.

That said, the current price correction may present a strategic entry point for long-term investors. Historical data from 2020–2021 shows that Bitcoin tends to outperform during easing cycles, particularly when liquidity expands and real yields fall. The approval of spot Bitcoin ETFs in 2024 and 2025 has also institutionalized demand, providing a structural tailwind for the asset. If the Fed continues to cut rates in 2026, as implied by its forward guidance, Bitcoin could retest its 2025 highs or even surpass them, especially if the dollar weakens further.

Conclusion: A Macro-Driven Case for Caution and Opportunity

Bitcoin's recent selloff reflects the challenges of navigating a tightening monetary environment, but the Fed's pivot toward easing offers a compelling counterbalance. While the path to a rally is not without risks-further corrections, geopolitical volatility, or a misstep in Fed policy-the historical correlation between liquidity expansions and Bitcoin's price performance suggests that the current dip could be a strategic entry point. Investors with a macroeconomic lens may find value in positioning for a potential rebound, particularly as the Fed's balance sheet stabilizes and rate cuts materialize in 2026.

As always, the key lies in balancing optimism with prudence. Bitcoin's volatility ensures that no investment is without risk, but in a world where central banks are increasingly shaping the financial landscape, understanding the interplay between monetary policy and crypto markets is essential for any investor seeking to capitalize on the next cycle.