Fed’s Rate Decision in 2025 Could Trigger Bear Market, Bitcoin Analyst Warns

Network economist Timothy Peterson has warned that if the U.S. Federal Reserve refrains from cutting interest rates in 2025, it could trigger a broader market downturn, potentially dragging Bitcoin back toward the $70,000 mark. Peterson, who is known for his work on Bitcoin’s valuation model using Metcalfe’s Law, suggested that Bitcoin could experience a sharp decline, with a possible bottom around $57,000, though he believes this is unlikely due to strong investor support for the digital asset.

Federal Reserve’s Stance on Interest Rates

Peterson’s comments came on the heels of remarks made by Federal Reserve Chairman Jerome Powell on March 7, where he reiterated that the Fed is in no rush to adjust interest rates. Powell emphasized that the central bank is well-positioned to wait for greater economic clarity before making any decisions, signaling that rate cuts might not come as soon as some had expected.

“We do not need to be in a hurry and are well-positioned to wait for greater clarity,” Powell said in his speech in New York.

Potential Bear Market Trigger

Peterson, who authored the paper “Metcalfe’s Law as a Model for Bitcoin’s Value,” suggested that the delay in rate cuts could be a key trigger for a broader market downturn, including a potential bear market for Bitcoin. He explained that a lack of Fed rate cuts in 2025 could lead to a “trigger” event, which could push Bitcoin toward a more significant correction.

“I think that trigger may be as simple as the Fed not cutting rates at all this year,” Peterson wrote in a post on X (formerly Twitter) on March 8.

Bitcoin’s Potential Decline

Using his Nasdaq-based price model, Peterson estimated that Bitcoin could see a 33% decline in the next bear market. This would bring the price down to around $57,000, based on his analysis of how the Nasdaq might perform during a market correction. Peterson applied a “1.9” times multiplier to the Nasdaq’s predicted drop, forecasting a Bitcoin decline that mirrors broader market trends.

However, Peterson cautioned that Bitcoin is unlikely to fall to such levels. He noted that historically, Bitcoin has tended to bottom at higher levels due to strong buying pressure from opportunistic traders.

“Traders and opportunists hover over Bitcoin like vultures,” Peterson explained, adding that once the market expects a price drop to $57,000, investors often step in and prevent the asset from falling that far.

Historical Trends and Bitcoin's Resilience

Peterson pointed to Bitcoin’s 2022 low as an example of its resilience. Many analysts had predicted that Bitcoin’s price would fall to $12,000, but the lowest point it reached was $16,000—about 25% higher than expected. He suggested that a similar phenomenon could occur in the next bear market, with Bitcoin’s bottom being closer to the low $70,000 range.

“If the price falls to $57,000, it’s likely to stop closer to $71,000,” Peterson stated. “I remember in 2022 when everyone said the bottom would be $12k. It only went to $16k, 25% higher than expected.” This would mean a potential bottom around $71,000, a level last seen in November 2021, after Donald Trump’s election win, before Bitcoin surged to $100,000 by December 2021.

Other Price Predictions

Peterson's forecast of a potential $57,000 bottom aligns with other analysts' predictions, although some expect more bullish outcomes. In January 2025, BitMEX co-founder Arthur Hayes predicted a potential correction for Bitcoin to the $70,000 to $75,000 range, citing a mini financial crisis. Hayes also projected that once the crisis subsides and money printing resumes, Bitcoin could reach $250,000 by the end of 2025.

Meanwhile, in December 2024, crypto mining firm Blockware Solutions suggested that Bitcoin’s "bear case" for 2025 could see the price hitting $150,000, assuming the Federal Reserve reverses course on interest rate cuts.

Conclusion

While Timothy Peterson's model suggests a potential decline to $57,000 for Bitcoin in the next bear market, he believes strong investor demand will likely prevent such a drop, with the price more likely to bottom out in the low $70,000 range. As market uncertainty continues and the Federal Reserve holds off on rate cuts, all eyes are on Bitcoin’s price movements, as both institutional and retail investors brace for the possibility of a broader market correction. With varying price predictions and market dynamics at play, the next few months could be pivotal in determining Bitcoin's trajectory for the remainder of 2025.