Bitcoin (BTC) appears to be on the cusp of a prolonged downward correction. According to Quinn Thompson, founder of the hedge fund Lekker Capital, a decline towards $50,000 this year is by no means out of the question.
The market is currently in a phase where confidence is gradually waning – without any major crashes occurring. According to Thompson, it is precisely this gradual, almost imperceptible decline that makes it particularly difficult for investors.
Trump’s Administration Policies as a Brake on Growth
It is striking that the market is currently not showing extreme volatility. There are no mass liquidations or panic selling, but rather a steady, demoralizing decline. This makes it difficult to determine the right time to enter or exit.
Thompson’s analysis focuses on four major economic hurdles. First, the new austerity program of the so-called Department of Government Efficiency (D.O.G.E.), a project led by Elon Musk. The goal is to reduce government spending by one trillion dollars by the end of May. However, according to Thompson, it was precisely this spending that fueled consumption and thus economic growth.
Secondly, there is the tightening of immigration policy. Less labor migration means bottlenecks in the labor market, which can lead to higher wages in the short term. This sounds positive, but for many companies, rising labor costs put a brake on investments and new hiring.
The third point is the unpredictable tariff policy. Daily changes and threats of import tariffs create uncertainty among companies. These companies postpone investments in anticipation of clearer framework conditions – which hampers economic momentum.
The Role of the Fed and the Pace of Interest Rate Cuts
Although the US Federal Reserve cut interest rates in 2024, the impact on the crypto market has been limited. Thompson expects further cuts – and in small steps – only in the second half of 2025. In his view, the Fed and the Treasury are passing the ball to each other in an effort to reduce inflation – even at the expense of growth.
According to Thompson, the crypto markets could be facing a year of stagnation. This is especially true because current policy leaves little room for stimulus measures. The government seems willing to accept an economic slowdown in order to address fundamental problems – even if it is painful in the short term.
Whether this “controlled fire” will truly remain controlled is questionable. But according to Lekker Capital, it seems increasingly likely that 2025 will be a tough year for crypto investors.
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