Bitcoin’s price decline may be heading for a significant downturn, with projections suggesting a potential fall to the $50,000-$59,999 range before the year ends. According to Quinn Thompson, founder of the crypto hedge fund Lekker Capital, the correction could be prolonged, making it even more painful for investors.
Bitcoin’s price decline and market struggles amid economic policy shifts
Bitcoin, currently hovering around $83,000, has already seen substantial declines from its recent peak of over $109,000. Thompson believes the ongoing market slump isn’t just a temporary dip but a prolonged downward trend, reminiscent of the 2022 crypto crash.
Unlike previous sell-offs marked by rapid declines, this correction is unfolding gradually, keeping investors in a state of uncertainty. “It’s not a sudden crash, but a slow grind down, which in some ways is more painful because people keep wondering if the bottom is in,” Thompson explained.
This gradual decline, according to Thompson, is being driven by external macroeconomic factors rather than internal cryptocurrency market trends. Bitcoin’s inability to recover despite several relief rallies indicates that deeper issues are at play.
The impact of U.S. economic policies on Bitcoin Price decline
Thompson attributes much of Bitcoin’s price decline to policies introduced by the Trump administration. He argues that these economic measures, aimed at reducing government spending and addressing inflation, could negatively impact risk-on assets like cryptocurrencies.
Several key factors are driving Bitcoin’s price decline outlook:
1. Government Spending Cuts
The newly established Department of Government Efficiency (D.O.G.E.), led by Elon Musk, is aggressively cutting government expenditures to tackle the national deficit. While these cuts may improve fiscal stability, they could also slow economic growth and reduce market liquidity.
For years, government stimulus and loose monetary policy have contributed to Bitcoin’s upward trajectory. Now, with a significant reduction in government spending, liquidity in financial markets is drying up, leading to lower investment in risk assets like Bitcoin.
2. Immigration Crackdown and Labor Market Pressure
The administration’s strict immigration policies and increased deportation efforts could also contribute to an economic slowdown. A shrinking labor force could lead to rising wages, forcing businesses to cut jobs or pass costs onto consumers, fueling inflation.
“People underestimate the importance of immigration in sustaining economic growth,” Thompson noted. “If businesses can’t hire the workers they need, production slows, and economic activity takes a hit. This could add to Bitcoin’s struggles.”
3. Tariff Uncertainty Impacting Investor Confidence
The Trump administration’s unpredictable stance on tariffs is creating uncertainty for businesses and investors. Some days, new tariffs are announced, while on others, they are withdrawn or modified. This lack of clarity discourages companies from making long-term investment decisions, further weakening the economy.
When businesses hesitate to invest or expand, it affects the broader financial markets, and Bitcoin, as a high-risk asset, often suffers as a result.
4. Federal Reserve’s Cautious Approach to Rate Cuts
The Federal Reserve cut interest rates by a full percentage point in late 2024 to 4.25%-4.5%, but that wasn’t enough to push Bitcoin above $110,000. Many had expected further cuts in 2025, but persistent inflation concerns have kept the Fed cautious.
Analysts predict additional rate cuts may range between 25 and 75 basis points, but they will be spread out over the second half of the year, meaning liquidity conditions will remain tight for the foreseeable future.
“I think there’s more coordination between the Treasury and the Fed than people realize,” Thompson said. “They want to bring asset prices down in a controlled way, and that means Bitcoin will likely face more headwinds.”
When could Bitcoin bottom out?
With these economic factors weighing on the market, Thompson suggests Bitcoin and other risk assets may struggle for the next six to nine months. He also notes that the White House appears willing to endure short-term economic pain to stabilize long-term growth.
“The administration is deliberately slowing down the economy to control inflation and curb excesses in asset prices,” Thompson said. “But sometimes, controlled burns turn into forest fires.”
He believes that the approach will have its limits, particularly as the 2026 midterm elections approach. If economic conditions worsen significantly, political pressure may force the administration to ease policies, potentially providing some relief for Bitcoin and the broader market.
Until then, investors should prepare for a challenging market environment, with Bitcoin potentially facing further downside before any recovery begins. The slow grind of Bitcoin’s price decline could prove even more frustrating than a sudden crash, leaving investors uncertain about when the bottom will be reached.
Thompson’s final piece of advice? “It’s going to be a test of patience. Only those who can endure the pain of this downturn will come out ahead when the market eventually turns around.”
