Key Takeaways
Why might Bitcoin’s momentum remain limited?
Global liquidity is rising, driving capital toward safer assets like banks, while institutional investors paused BTC accumulation.
What factors are supporting Bitcoin’s short-term rally?
Long-term holders are accumulating BTC, while the Fed’s 25 bps rate cut acts as a bullish catalyst for Bitcoin.
Bitcoin [BTC] continued its rally in the past day, with the asset closing above $117,000 on the chart.
Though this close coincided with rising global liquidity, it might be unfavorable for the asset. AMBCrypto paints a clear picture of what is happening.
Global liquidity rises — Negative for Bitcoin
There has been a surge in global liquidity over the past day, according to from Alphractal. Ideally, this should imply that assets, including Bitcoin, should rise as more capital flows into the global market.
However, the current scenario is not entirely positive for Bitcoin. A rise in global liquidity often results in stronger inflows into banks, while Bitcoin tends to drop—a pattern that has persisted since 2022.
Source: Alphractal
At press time, bank liquidity was at $30.4 trillion, while the global money supply (M2) was at $128.1 trillion, with both continuing to rise.
This suggested that capital flowing into Bitcoin, a known risk asset, could remain limited as more investors allocated funds into safer asset classes.
AMBCrypto also examined how institutional investors are behaving, finding their actions in line with global liquidity trends.
Institutions pause Bitcoin accumulation
Institutional investors have put their buying activity on hold, according to SosoValue, which tracks Bitcoin spot exchange-traded funds (ETFs).
After accumulating more than $2.3 billion worth of Bitcoin, these investors made a sharp turnaround in the past day, selling off $51.28 million worth of BTC.
Source: SosoValue
This movement aligns with the global liquidity rise, implying that traditional investors are rotating capital accordingly.
During the same period, the amount of Bitcoin available on exchanges recorded a slight increase, with 2.451 million BTC now circulating in the market.
When exchange balances rise, it often indicates a potential sell-off, pushing the asset’s price lower as liquidity becomes more readily available.
AMBCrypto took the analysis a step further, examining what factors could still be driving Bitcoin forward, and found two key indicators.
Long-term holders and Fed policy boost Bitcoin
The recent rally appears linked to long-term holders’ profitability and their continued accumulation without selling.
Source: CryptoQuant
More importantly, the Federal Reserve’s decision to cut interest rates by 25 bps has been a major catalyst. This move has historically been associated with more liquidity flowing into Bitcoin, boosting its price action.
Next: Post-FOMC liquidity shuffle: Will altcoin season run deeper into Q4?
