Fed to the Rescue? Bitcoin Could Recover by May as Liquidity Eases, Analysts Say

Bitcoin, navigating a $2.85 trillion crypto market, faces turbulence. According to Charles Edwards of Capriole Investments, President Donald Trump announced global reciprocal trade tariffs, triggering an 8.5% single-day drop in Bitcoin’s price. Yet, amid this uncertainty, analysts see a potential lifeline. The Federal Reserve’s shift toward easing liquidity could spark Bitcoin’s recovery as early as May 2025. This feature examines the data and expert insights driving this outlook. Tariffs Trigger Bitcoin Price Decline Trump’s tariffs, announced on April 2, 2025, hit Bitcoin hard. The cryptocurrency dropped 8.5% in a single day, while U.S. stocks later recovered. Through an X post on April 3, Edwards compared the situation to the 2022 bear market bottom, noting U.S. business expectations at levels seen in 2000, 2008, and 2022—years tied to major downturns. The Philadelphia Fed’s Business Outlook Survey (BOS) reported business confidence falling below 15, a marker of economic strain, per the survey. Edwards cautioned, “If the tariff war escalates or corporate margins shrink, we could see further downside.” Source: Capriole Investments Bitcoin traders are watching critical levels. A daily close above $84,000 could signal bullish momentum, per Capriole Investments. The next target is $91,000, a key resistance, per the analysis. However, if prices fall, Bitcoin may test the $71,000 support zone, where a rebound could occur, analysts note. Capriole Investments stated that the U.S. macroeconomic environment will determine Bitcoin’s next major move. With economic pressure rising, analysts predict Bitcoin could hit $71,000 if conditions worsen. Fed’s Liquidity Shift: A Potential Catalyst The Federal Reserve’s recent policy easing offers hope. The Fed has relaxed its tight monetary stance, raising speculation about a return to quantitative easing (QE). Edwards asked, “How long until the Powell printer starts humming?” Referring to an increase in M2 money supply, which historically boosts Bitcoin’s price . Analysts believe if M2 liquidity rises, Bitcoin could begin recovering by May 2025, per the report. The Fed’s actions align with market needs. On March 19, 2025, a dispatch analyst at Nexo noted that ending the Fed’s quantitative tightening could boost liquidity and risk assets like Bitcoin. Federal Reserve Chair Jerome Powell expressed doubts about sustained inflationary impacts from Trump’s tariffs on March 17, 2025, referencing 2019, when tariff-related inflation was temporary. Powell’s comments suggest the Fed may remain on hold, potentially supporting Bitcoin’s recovery, per the post. Bitcoin price struggles reflect broader market dynamics. The crypto market peaked at $2.85 trillion before dropping. U.S. business confidence, as measured by the Philadelphia Fed’s BOS, fell below 15, a level tied to high-risk periods. Edwards noted that while BOS data isn’t always accurate, it has historically signaled market stress. Meanwhile, gold has outperformed Bitcoin, What’s Next for Bitcoin? Analysts see a potential turning point. If the Fed increases M2 liquidity, Bitcoin could recover by May 2025. However, the $71,000 support level looms if economic pressure persists. The Fed’s next moves, expected after the April 2, 2025, tariff announcement, will be crucial,

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