The cryptocurrency market is experiencing high volatility, with various explanations circulating, often contradictory. Beyond influencer noise and surface analyses, a darker reality emerges. Renowned analyst Doctor Profit warns of early signs of a major liquidity crisis, historically preceding significant market crashes.
The main misunderstanding revolves around the actions of the U.S. Federal Reserve. Contrary to popular belief, the announced end of Quantitative Tightening (QT) scheduled for December 1, 2025 does not signal the beginning of Quantitative Easing (QE) or “money printing.” Until that date, the Fed continues to withdraw liquidity from the system. Historically, QE only occurs after a confirmed liquidity crisis, as seen in 2008 or 2020.
And signs of this crisis are already present. The massive use of the Fed’s “Standing Repo Facility” (SRF), which reached $50 billion in a single day, is a warning signal. This is not an injection of liquidity, but emergency overnight loans that banks are forced to use because the private market has run dry. Doctor Profit explains:
“The reason banks used the SRF instead of the ordinary repo market is that liquidity in the private repo market has dried up. […] The increased use of the SRF confirms that the system is tightening.”
In other words, the global financial engine is beginning to sputter, and cryptocurrencies. As high-risk assets, are the first to suffer the consequences.
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In this context of macroeconomic uncertainty, an interesting dichotomy is emerging. While stock markets, particularly in the United States, continue to perform well. Bitcoin and the rest of the crypto market struggle to find support. This divergence can be explained by a clear shift in allocation from institutional investors.
Faced with dwindling liquidity and high interest rates, investors are prioritizing assets they consider safer and more profitable in the short term. Stocks of large companies, backed by solid balance sheets and predictable cash flows. Appear to be a more attractive haven than Bitcoin, whose volatility is exacerbated by the lack of liquidity.
The crypto market is therefore doubly penalized: it’s bearing the full brunt of the contraction in global liquidity while suffering in comparison to more resilient stock markets. Until this liquidity crisis is resolved – likely through massive Fed intervention in the form of QE. Which isn’t yet on the agenda – the crypto market risks experiencing even darker days ahead.
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Charles Ledoux is a Bitcoin and blockchain technology specialist. A graduate of the Crypto Academy, he has been a Bitcoin miner for over a year. He has written numerous masterclasses to educate newcomers to the industry and has authored over 2,000 articles on cryptocurrency. Now, he aims to share his passion for crypto through his articles for InvestX.
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