Bitcoin extended its decline on Jan. 29 as the Federal Reserve opted to hold interest rates steady at 3.50%–3.75%, marking its first policy meeting of the year. The BTC/USD pair dropped roughly 1.5%, maintaining a precarious position just above the psychologically important $88,000 support level. The decline coincided with rising trading volumes, signaling strong bearish conviction among crypto market participants.
The Fed’s decision to pause follows three interest rate cuts in 2025, with officials advocating a cautious, wait-and-see approach due to persistent inflation and a cooling labor market. Higher rates increase the opportunity cost of holding yield-bearing assets such as U.S. Treasuries, reducing the appeal of risk-on investments like Bitcoin and equities. This dynamic was mirrored in the futures market, where S&P 500 contracts fell by up to 0.52% on the same day, reflecting broader risk-off sentiment.
Geopolitical tensions have further contributed to the market’s cautious mood. Escalating hostilities between the U.S. and Iran, highlighted by the deployment of a U.S. carrier strike group to the region, have fueled fears of a broader conflict. Oil prices climbed for a third consecutive session, while gold reached new highs, drawing investor attention away from cryptocurrencies and equities.
On-chain metrics reinforce the bearish outlook for Bitcoin. The metric tracking Bitcoin’s supply in loss is rising after years of decline, suggesting that downside pressure is moving beyond short-term traders to longer-term holders. Historical trends indicate that such a shift often precedes bear market phases, as losses gradually migrate to more resilient holders before capitulation occurs. Average Bitcoin deposits to exchanges have also increased from 0.7 to 1.2 BTC between November 2025 and January 2026, suggesting that whales may be positioning to sell or hedge as prices climb.
From a technical standpoint, Bitcoin’s four-hour chart shows a falling wedge formation, pointing to a potential slide toward $84,000 in early February. This level coincides with a key Fibonacci retracement zone near 0.786, strengthening its role as support. On the weekly chart, a bear-flag setup indicates further downside risk. While Bitcoin has found short-term stability around the 100-week EMA, continued lower highs and a downward-sloping channel suggest that a weekly close below the flag support could trigger a deeper drop toward $70,000, near the 200-week EMA.
Taken together, macroeconomic, geopolitical, and technical factors suggest that Bitcoin may be entering a more extended bear-market phase rather than a temporary pullback. Traders and investors should monitor key support levels closely, as a break below $88,000 could accelerate the downside, while a bounce may offer an opportunity for a controlled recovery. The current environment underscores the need for strategic risk management and careful positioning as Bitcoin navigates a period of heightened uncertainty.
