BIT Research: Is Liquidity Disappearing? Will Bitcoin Repeat the Bottoming Process of 2022?
- Core View: The current market is in an adjustment phase dominated by a hawkish shift in policy expectations and continuous liquidity contraction. Bitcoin faces short-term pressure, but this adjustment process may lay the foundation for a cycle low ahead of the next bull run.
- Key Factors:
- Hawkish signals from Federal Reserve Chairman Kevin Warsh have shattered easing expectations. With inflation at 4.2%, far above the target, the possibility of rate hikes is rising, leading to an increase in risk premiums.
- Trend models indicate that if Bitcoin remains below $73,700, the outlook stays bearish. The key support level is $62,446; a break below could accelerate the downward trend.
- Daily trading volume has shrunk to approximately $50 billion, just 25% of the 2025 peak (around $200 billion), indicating a significant contraction in liquidity.
- The 12-month growth rates for stablecoins USDT and USDC have retreated from their peaks to around 20%, with the 6-month growth rate near zero, signaling insufficient new capital inflows.
- The support effect from Strategy's Bitcoin purchases financed via STRC preferred stock is gradually fading. The market's 30-day rolling capital flow remains in a net outflow state.
The current market is in an adjustment phase jointly driven by policy expectations and liquidity changes. The easing of geopolitical tensions and the better-than-expected performance of the SpaceX IPO once pushed Bitcoin to rebound from technically oversold levels. However, the unexpected hawkish signals from the new Federal Reserve Chairman, Kevin Warsh, caused the market to lose the previously anticipated support for easing. Simultaneously, stablecoin liquidity continues to contract, new capital inflows are clearly insufficient, and the market has re-entered the typically low trading activity phase of summer.
From the current pricing perspective, the market still lacks macro catalysts sufficient to drive a new round of upward momentum. Daily trading volumes have contracted significantly compared to the peak period in 2025, the growth rate of stablecoins continues to slow, and the supporting effect from Strategy (formerly MicroStrategy) purchasing Bitcoin through STRC preferred stock financing is gradually diminishing. Under the combined pressure of policy uncertainty, seasonal weakness, and liquidity contraction, Bitcoin's short-term trajectory remains under strain.
Hawkish Sentiment Intensifies: Policy Uncertainty Weighs on Market Risk Appetite
The market had widely anticipated that the new Federal Reserve Chairman, Kevin Warsh, would signal a dovish stance, but the FOMC unexpectedly pivoted towards hawkishness. Several committee members hinted at the possibility of further interest rate hikes this year if inflationary pressures persist, and Warsh also clearly expressed his determination to rebuild policy credibility.
The trend model indicates that as long as Bitcoin remains below $73,700, the overall trend stays bearish, with key resistance levels gradually declining over time. Meanwhile, Warsh's refusal to disclose his personal interest rate dot plot has left the market without a clear policy anchor, leading to an increase in the risk premium. Historically, this type of uncertainty tends to be unfavorable for a sustained Bitcoin rebound.
From a technical perspective, $62,446 remains a key support level. A decisive break below this level could accelerate the downward trend. However, similar to the bottoming process in 2022, the market might also undergo an extended period of consolidation, gradually completing the formation of a cyclical low.
Liquidity Continues to Contract: Insufficient New Capital Limits Rebound Potential
Beyond macro factors, insufficient liquidity is becoming a core constraint for the current market. Daily trading volume has at times shrunk to approximately $50 billion. In contrast, the average daily trading volume during the rally phase from July to October 2025 was about $200 billion, roughly 25% of that previous peak.
Stablecoin growth has also slowed markedly. The 12-month rolling growth rates for USDT and USDC reached 52% and 122% respectively by the end of 2025, but year-over-year growth has now declined to around 20%. The 6-month growth rate is even closer to zero, reflecting a significant weakening in new liquidity generation.
Meanwhile, capital inflows from Bitcoin ETFs and Strategy have also weakened considerably compared to before. Previously, Strategy's aggressive issuance of STRC preferred stock temporarily drove Bitcoin up by approximately $15,000, a gain of nearly 20%, but this supportive effect is now fading. The current 30-day rolling net flow for the market remains negative. Without a new, powerful catalyst, a sustained upward trend remains difficult to establish.
Overall, with inflation at 4.2% significantly above the Fed's 2.0% target, and under the combined influence of a hawkish stance, typical summer seasonal weakness, and insufficient liquidity, Bitcoin lacks substantial support to hold steadily above $60,000 in the short term. However, as the market gradually completes its clearing process, this adjustment phase could still build a cyclical low this summer. Prices may not immediately trigger a new rally, but this process could potentially be laying the groundwork for the next bull market cycle.
Some of the above views are from BIT on Target. Contact us to obtain the full BIT on Target report.
Disclaimer: The market carries risks, and investment requires caution. This content does not constitute investment advice. Digital asset trading may involve significant risk and volatility. Investment decisions should be made after carefully considering personal circumstances and consulting with financial professionals. BIT is not responsible for any investment decisions made based on the information provided in this content.
