Most analysts blame lack of liquidity for Bitcoin’s terrible performance, but it’s more than that.
The 50% decline from a four-month high comes as global liquidity has increased, contradicting the common argument that price follows liquidity.
“The difference is striking and it requires explanation,” said Chris Tipper, economist and strategist at Ainslie Group. According to Ainslie Wealth, global liquidity has risen by nearly $5 trillion since Bitcoin’s peak in October and now stands at nearly $190 trillion.
However, this is being led by the People’s Bank of China, which has added $1 trillion in 2025 and possibly another trillion this year, Tipper said.
China has gold dominance over bitcoin
He added that China’s liquidity is not flowing into bitcoin (which is banned), it is flowing into gold reserves, domestic infrastructure and the real economy.
“So when you take out China’s contribution and just look at the liquidity in the West that Bitcoin is really reacting to, the momentum peaked in October and has been slowing ever since.”
Gold markets responded, hitting new all-time highs in late January, with the precious metal trading just 5% below that peak today. Bitcoin responded and corrected the western component.
“Two assets, one headline liquidity figure, opposite performance, completely explained by bifurcation.”
The economist concluded that when Western liquidity momentum picks up again, whether from the Federal Reserve’s response to market pressure, a weaker dollar, or a “disruptive event that forces intervention,” Bitcoin has an important basis for recovery.
The U.S. dollar index (DXY), as a “crude proxy for Western liquidity, seems to support your argument,” explained Abra CEO and Algorand Chairman Bill Barkhedt.
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DXY has recovered in recent days following the escalation of military attacks in Iran. From 97.5 at the end of February, it rose to 99.6 on Tuesday as the dollar rallied, according to TradingView. A stronger dollar is also bad news for Bitcoin markets.
BTC price outlook
At the same time, Bitcoin fell again below $67,000 in late trading on Tuesday, but managed to recover to $68,500 by Wednesday morning in Asia.
The asset has seen strong resistance at $70,000 and is unlikely to break above that until Western liquidity improves through Fed rate cuts or more money printing.
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