BTC now more sensitive to liquidity than interest rates, analysis suggests

Bitcoin has become more sensitive to changes in actual market liquidity than to potential interest rate cuts by the U.S. Federal Reserve in recent months, Cointelegraph reported. For years, Fed rate decisions were a key macroeconomic driver for the crypto market, with lower rates typically leading to rallies by reducing borrowing costs and improving risk appetite. However, the analysis suggests BTC is now more directly influenced by the level of liquidity within the financial system. The report notes two main reasons why rate cuts no longer significantly move BTC prices: markets have already priced in the possibility of cuts, and a rate cut could signal economic weakness, prompting risk-aversion and a crypto sell-off. As the crypto market's sensitivity to liquidity grows, investors should also monitor indicators such as the Fed's quantitative tightening (QT) program, increased Treasury bond issuance, and declining bank reserves. BTC is now being evaluated less as a simple bet on interest rates and more as a barometer for liquidity in the global financial environment, the report added.