BIT Investment Research: Is Liquidity Disappearing? Will Bitcoin Repeat the Bottoming Process of 2022?
- Core Viewpoint: 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 the adjustment process may lay the foundation for a cyclical bottom before the next bull run.
- Key Factors:
- The hawkish signals from Federal Reserve Chairman Kevin Warsh have shattered easing expectations. With inflation at 4.2%, far above the target, the possibility of interest rate hikes is rising, leading to an increase in risk premiums.
- The trend model suggests that if Bitcoin falls below $73,700, the outlook remains bearish. The key support level is $62,446; a break below this could accelerate the downward trend.
- Daily trading volume has shrunk to approximately $50 billion, only 25% of the peak in 2025 (around $200 billion), indicating a significant liquidity contraction.
- The 12-month growth rate of stablecoins USDT and USDC has fallen from their peaks to around 20%, while the 6-month growth rate is near zero, pointing to a lack of new capital inflow.
- The supporting effect of Strategy's Bitcoin purchases funded by 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 dominated 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 technical oversold levels. However, the unexpected hawkish signals from new Federal Reserve Chair Kevin Warsh have stripped the market of the previously anticipated support from easing expectations. Concurrently, stablecoin liquidity continues to contract, new capital inflows are clearly insufficient, and the market has re-entered a typical light trading period for the summer.
From the current pricing perspective, the market still lacks macro catalysts sufficient to drive a new round of upward movement. Daily trading volume has significantly shrunk compared to the peak period of 2025, the growth rate of stablecoins continues to slow down, and the supportive effect from Strategy (formerly MicroStrategy) purchasing Bitcoin through STRC preferred stock financing is also gradually weakening. Under the combined influence of policy uncertainty, seasonal weakness, and liquidity contraction, Bitcoin's short-term trajectory remains under pressure.
Intensifying Hawkish Expectations: Policy Uncertainty Suppresses Market Risk Appetite
The market had generally expected new Fed Chair Kevin Warsh to deliver dovish signals, but the FOMC unexpectedly pivoted to a hawkish stance. 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 remains bearish, and key resistance levels will gradually move lower over time. Meanwhile, Warsh's refusal to disclose his personal dot plot projections has left the market without a clear policy anchor, leading to a rise in the risk premium. Historically, this type of uncertainty has often been unfavorable for a sustained Bitcoin rebound.
From a technical perspective, $62,446 remains a key support level. A break below this level could accelerate the downward trend. However, similar to the bottoming process in 2022, the market could also undergo a prolonged period of consolidation, gradually completing the formation of a cycle low.
Persistent Liquidity Contraction: Insufficient New Capital Limits Rebound Potential
Beyond macro factors, insufficient liquidity is becoming a core constraint for the current market. Daily trading volume has sometimes shrunk to around $50 billion, whereas the average daily volume during the upward phase from July to October 2025 was approximately $200 billion – only about 25% of that previous peak.
The growth of stablecoins has also notably slowed. The 12-month rolling growth rates for USDT and USDC were 52% and 122%, respectively, by the end of 2025. Currently, both year-over-year growth rates have fallen back to around 20%, and the 6-month growth rate is closer to zero, reflecting a significant weakening of new liquidity.
Meanwhile, capital inflows from Bitcoin ETFs and Strategy have also significantly diminished compared to before. Previously, Strategy's aggressive issuance of STRC preferred stock had driven Bitcoin up by approximately $15,000, a gain of nearly 20%. However, this supportive effect is gradually fading. The market's current 30-day rolling capital flow remains in net outflow territory. Without strong new catalysts, the formation of a sustained upward trend remains difficult.
Overall, with the inflation rate at 4.2% far exceeding the Fed's 2.0% target, and under the combined influence of a hawkish stance, summer seasonal weakness, and liquidity shortage, Bitcoin lacks sufficient support to sustainably hold above $60,000 in the short term. However, as the market gradually completes its cleansing process, this adjustment phase could still potentially establish a cycle low this summer. Prices may not immediately trigger a new rally, but this process could be laying the groundwork for the next bull market cycle.
Some of the above views come from BIT on Target. Contact us to obtain the full BIT on Target report.
Disclaimer: The market carries risks, and investment requires caution. This article does not constitute investment advice. Digital asset trading may involve significant risks and instability. Investment decisions should be made after careful consideration of personal circumstances and consultation with financial professionals. BIT is not responsible for any investment decisions made based on the information provided in this content.
