Bitcoin (BTC) has been under pressure, trading below $85K for over a week as analysts assess its chances of recovery ahead of the Federal Open Market Committee (FOMC) meeting on March 19, 2025. While some analysts are optimistic that a shift in U.S. liquidity could trigger a rebound for Bitcoin, others are warning of weak demand, signaling that a bear market could be in play.

Could U.S. Liquidity Rebound Boost Bitcoin?

One key factor influencing Bitcoin’s prospects is the potential for a rebound in U.S. liquidity. Charles Edwards, Co-Founder of crypto VC Capriole Investments, believes Bitcoin could bounce back, citing early signs of a bottom in U.S. liquidity. Edwards pointed out that, unlike the previous cycle that saw a strong upward trend in monetary policy, the current cycle has been characterized by a flat monetary stance, largely due to quantitative tightening (QT). After four years of QT, a shift toward increased liquidity could be a game-changer for Bitcoin, Edwards suggested.

Increased U.S. liquidity typically translates to more money circulating in the economy, a factor historically favorable for risk assets like Bitcoin. However, such a shift remains contingent on the Federal Reserve’s actions during the FOMC meeting. Analysts are keeping a close eye on Fed Chair Jerome Powell’s press conference for any indications of a change in monetary policy, particularly regarding the potential pause or end of QT.

Fed’s Stance and Bitcoin’s Recovery Outlook

The markets have largely priced in no interest rate cuts during the upcoming FOMC meeting, but traders and analysts are still looking for clues about the Fed’s stance on quantitative tightening. Coinbase analysts, in their weekly market review, suggested there is a “good chance” that the Fed could pause or halt QT, given that U.S. bank reserve levels are nearing the threshold commonly deemed sufficient for maintaining financial stability.

Renowned trader Cryp Nuevo also sees potential for a short-term bounce in Bitcoin’s price. He expects BTC to test support around the $85K-$87K range, with a liquidity hunt possibly driving a temporary recovery. However, even with such potential short-term rallies, the question remains whether these will be sustainable or just short-lived price movements.

Bear Market Concerns

Despite the optimistic outlook from some analysts, others are more cautious, pointing to weak demand and warning signs of a potential bear market. Bitfinex analysts noted that institutional demand for Bitcoin, as evidenced by ongoing outflows from U.S. spot Bitcoin ETFs, remains lackluster. Last week, Bitcoin ETFs saw $921.4 million in outflows, suggesting that institutional investors have yet to return in force to support a significant recovery.

CryptoQuant founder Ki Young Ju also highlighted that Bitcoin has likely entered a bear market. He pointed to the lack of new liquidity and weak ETF inflows, which have been negative for three consecutive weeks. According to Ju, the price failed to rally despite massive volume at the $100K level, further reinforcing the bearish case for Bitcoin in the near term.

Final Thoughts

Bitcoin’s future in the short term remains uncertain, with analysts divided on its prospects. While some hope that a potential shift in U.S. liquidity could trigger a recovery, others warn that weak demand and low institutional participation could push Bitcoin into a bear market. The upcoming FOMC meeting could be a critical juncture for determining Bitcoin’s next move, but with mixed signals from key on-chain indicators, Bitcoin’s fate remains unclear as it struggles to regain momentum.