The U.S. Federal Reserve has signaled a potential shift in monetary policy by injecting $400 billion in liquidity into the U.S. economy on January 1, 2025. This substantial liquidity injection, measured through the Reverse Repo Facility, could mark a move away from quantitative tightening (QT) toward quantitative easing (QE), a shift that historically favors risk-on assets like Bitcoin (BTC).

Market analysts are closely monitoring this development, as a similar uptick in the Repo Facility in 2021 fueled a significant Bitcoin rally. If the Fed continues to prioritize liquidity injections, it could set the stage for BTC to reclaim higher price levels in the coming months.

The Role of Short-Term Holders Amid Long-Term Sell-Off

Despite optimism from macroeconomic shifts, Bitcoin faces challenges on the supply side. Long-term holders (LTH), who typically act as a stabilizing force in the market, have been offloading their holdings since September 2024. Over the past three months, LTH supply has dropped significantly, shrinking from 14.2 million BTC to approximately 13.1 million BTC—a net sale of over 1 million coins.

However, this selling pressure has been largely absorbed by short-term holders (STH). During the same period, STH supply surged from 2.5 million BTC to 3.8 million BTC, indicating strong buying interest among newer or more opportunistic market participants.

This redistribution of supply highlights a shift in market dynamics, with short-term traders stepping in to capitalize on potential price movements.

Bitcoin Bulls Target $97K

At press time, Bitcoin was trading around $95,000, with bulls eyeing a critical resistance level at $97,000. A decisive break above this level could flip the higher-timeframe market structure bullish, potentially paving the way for further gains.

Technical indicators suggest that BTC’s immediate trajectory depends on its ability to clear key moving averages and sustain momentum above $97,000. However, failure to break this resistance could lead to a retracement toward the 100-day Exponential Moving Average (EMA) at $93,000 or even deeper to the $90,000 support zone.

This makes the $97,000 mark a crucial inflection point for Bitcoin’s short-term outlook.

Market Outlook and Predictions

Prominent macro and crypto analyst Chicken Genius has projected that the Fed’s quantitative tightening could end in Q1 2025. If this prediction holds true, it would align with increased liquidity and reduced financial tightening, creating a favorable environment for Bitcoin and other cryptocurrencies.

Historically, periods of QE have corresponded with strong uptrends in Bitcoin, driven by increased market liquidity and investor appetite for risk-on assets. However, the sustained sell-off by long-term holders poses a challenge, as it indicates reduced confidence among veteran market participants.

For Bitcoin to sustain a rally and move decisively beyond $97,000, the market will need a combination of continued macroeconomic support and a shift in sentiment among long-term holders.

Conclusion

The Fed’s $400 billion liquidity injection has rekindled optimism in the cryptocurrency market, offering a potential catalyst for Bitcoin’s next leg upward. However, challenges remain as long-term holder sell-offs persist, countered by strong short-term buying interest.

With $97,000 emerging as a key resistance level, Bitcoin’s near-term trajectory hangs in the balance. A break above this critical threshold could signal renewed bullish momentum, while failure to clear it might lead to further consolidation.

As the market navigates these dynamics, Bitcoin remains a focal point for traders and investors seeking to capitalize on the evolving macroeconomic landscape.