Bitcoin faces potential decline as inflation concerns rise

Steno Research has issued a warning that Bitcoin (CRYPTO:BTC) holders should prepare for further sell-offs as inflation rates in the U.S. create a challenging environment for riskier assets.

In a report dated January 13, Steno noted that Bitcoin's spot price has fallen approximately 10% since mid-December, dropping from around $106,000 to about $96,000 as of January 14.

The firm predicts that Bitcoin could dip to as low as $85,000 per coin if inflation continues to rise.

Steno highlighted that the current market conditions reflect ongoing adjustments due to an unfavorable macroeconomic landscape, with inflation becoming a central concern once again.

The report also pointed out that Bitcoin's derivatives markets appear overheated, indicating that excess leverage must be unwound during this repricing phase.

Sustained inflation could exacerbate pressures on the cryptocurrency market, potentially leading to further declines before any recovery occurs.

On January 10, a positive U.S. jobs report contributed to Bitcoin's spot price falling below $93,000 as the U.S. dollar strengthened amid expectations of slower interest rate cuts.

Currently, futures markets indicate a less than 3% probability of an interest rate cut in January, which is typically favorable for risky assets like Bitcoin.

Steno anticipates that the upcoming Consumer Price Index (CPI) report on January 15 may reveal higher-than-expected inflation figures, with predictions of a monthly increase of about 0.4%, surpassing consensus expectations of 0.3%.

"If our forecast proves accurate, this upside surprise will catch markets off guard and exert further downward pressure on digital asset prices," Steno stated.

Despite these short-term challenges, Steno remains optimistic about the future of Bitcoin, projecting it could reach $150,000 by 2025 due to favorable regulatory conditions and a supportive macroeconomic environment.

At the time of reporting, the Bitcoin (BTC) price was $97,196.89.