Analysis suggests that Bitcoin's difficulty in breaking through $90,000 may be due to the Federal Reserve's balance sheet reduction draining market liquidity.

According to Mars Finance, Bitcoin failed to hold the key price level of $92,000 over the past month and is currently hovering below $90,000. Some traders believe the recent decline in Bitcoin's price is due to market manipulation, while others attribute the drop to increased market concerns about the artificial intelligence industry. However, analysts believe that a significant factor limiting Bitcoin's price increases is the Federal Reserve's plan to shrink its balance sheet for most of 2025. This move has drained liquidity from the financial markets. Although there are clear signs that the Fed is shifting towards a more accommodative monetary policy, traders are uncertain whether the Fed can lower interest rates below 3.5% in 2026. With investors' risk aversion rising, Bitcoin is unlikely to serve as a hedge in the short term.