The Vanishing Act of Liquidity: A Crypto Market Conundrum

By Omkar Godbole (All times ET unless otherwise stated) Bitcoin, currently priced at $86,817.46, continues to fluctuate around the $103,000 mark, struggling to sustain Wednesday's rebound from under $100,000. The CoinDesk 20 Index has seen a 2% increase over the past 24 hours, accompanied by substantial 18% gains in ZEC, ICP, and QNT. The crypto market has taken on the characteristics of a game of musical chairs, with liquidity shifting between tokens without any new influx, a phenomenon Wintermute refers to as "self-funded mode." According to Wintermute, new inflows have been dwindling over the past few months across the three primary channels through which capital enters the ecosystem: stablecoins, ETFs, and digital asset treasuries (DATs). For instance, U.S.-listed spot ETFs have experienced cumulative outflows exceeding $1.5 billion in less than two weeks, and demand from digital asset treasury firms has plummeted sharply from its third-quarter peak. Interestingly, the absence of fiat inflows coincides with the continued rise in the M2 money supply in major countries, driven by fiscal spending aimed at stimulating a global capital expenditure cycle focused on technology, particularly AI, infrastructure, and domestic demand. The key question remains: when will liquidity start flowing back into the market? Perhaps soon, as the Fed is easing into an inflationary bubble, as described by Ray Dalio in his post. Elevated inflation could sustain demand for gold and gold-like assets, such as bitcoin. Altcoins involved in AI or linked to beneficiaries of fiscal stimulus may also perform well, while others may struggle. For now, traders should keep a close eye on bitcoin's interaction with its 50-week simple moving average, a crucial bull market support since early 2023. A strong rebound here could signal new record highs. In other news, crypto exchange Coinbase (COIN) has urged the U.S. Treasury to ensure its upcoming rules for the GENUIS stablecoin do not exceed statutory requirements. Decentralized exchange Lighter, which recently experienced a bot glitch that pushed HYPE's price near $100, has adopted Chainlink as its oracle partner for real-world asset derivatives. In traditional markets, the dollar index rally is approaching resistance at the August high of 100.25. A breakout could put additional pressure on the crypto market. Goldman Sachs believes the U.S. Supreme Court is increasingly likely to rule against the Trump administration's use of emergency powers to impose tariffs, although any reductions would likely apply to smaller trading partners rather than major ones like China. Stay alert! What to Watch For a more comprehensive list of events this week, see CoinDesk's "Crypto Week Ahead". Token Events For a more comprehensive list of events this week, see CoinDesk's "Crypto Week Ahead". Conferences For a more comprehensive list of events this week, see CoinDesk's "Crypto Week Ahead". Read more: For analysis of today's activity in altcoins and derivatives, see Crypto Markets Today Market Movements Bitcoin Stats Technical Analysis Crypto Equities Crypto Treasury Companies ETF Flows Spot BTC ETFs Spot ETH ETFs Source: Farside Investors While You Were Sleeping