Bitcoin Recovery Expected As Liquidity Conditions Change, But Us...

Bitcoin’s recent weakness reflects broader economic stress, but improving liquidity and investors’ positive outlook for 2026 could set the stage for a strong rebound.

Federal Reserve balance-sheet limits and possible repo operations point to improving liquidity conditions that could boost Bitcoin and other risk assets.

Fiscal strain and sector weakness currently weigh on markets, but easing tariffs and a targeted stimulus plan may support a recovery in crypto demand.

Bitcoin (BTC) and the broader crypto market could remain under pressure ahead of the upcoming US Federal Reserve interest rate decision on Dec. 10. Expectations for the direction of monetary policy remain highly split, with concerns over inflation clashing against signs of slowing economic activity.

Traders are divided between a 0.25% cut and keeping rates steady at 4%, based on implied odds on government bond markets. The more cautious Fed members argue that US President Donald Trump’s tariffs have added inflation pressure, reducing the room to ease rates and support growth. At the same time, the US job market shows clear signs of cooling, according to reports from BlackRock.

Concerns with sticky inflation have been regularly cited by Fed officials. “I worry that restrictive monetary policy is weighing on the economy, especially about how it is affecting lower-and middle-income consumers,” Fed Governor Christopher Waller said on Monday. Waller dismissed rumors that the missing official data, resulting from the government shutdown, has hurt the Fed’s visibility.

Still, blaming Bitcoin’s weakness only on the Fed seems inaccurate, given that the downtrend started in early October. US import tariffs helped narrow the monthly government deficit, and the Fed’s balance sheet continued to shrink, causing the US dollar to strengthen against a basket of major currencies. Historically, Bitcoin holds an inverse correlation to the dollar Index (DXY).

Pinpointing the exact trigger behind Bitcoin’s weakness since the Oct. 6 all-time high is nearly impossible. Financial conditions worsened as freight activity slowed, housing markets softened, and companies faced tighter cash flows, according to a Savvy Wealth report. As a result, Bitcoin’s decline may stem more from broad risk aversion than from dollar strength alone.

The Fed has signaled that it will no longer allow its assets under management to fall below the current $6.5 trillion, starting in December. This move could be offset by the launch of r

Source: CoinTelegraph