Bitcoin's 2025 rally sat on a liquidity foundation that looks solid until investors examine what changed in the final quarter.
Some analysts point to global liquidity indexes hitting record highs and declare the wave is still building. Others cite CrossBorder Capital's high-frequency tracking and argue momentum peaked in early November, with the US cycle now rolling over.
Both camps are looking at real data. The question is whether liquidity level matters more than its direction, and what that split means for Bitcoin heading into 2026.
Record highs and fading momentum
The Bank for International Settlements data on global liquidity shows that 2025 opened with genuine expansion: cross-border bank credit in foreign currencies hit a record $34.7 trillion in the first quarter, with dollar, euro, and yen credit growing 5% to 10% year-on-year.
By end-June, BIS' broader global liquidity index still showed foreign currency credit growing 6% in dollars and 13% in euros versus a year earlier. That's the backdrop bulls cite when they say liquidity broke to new highs and stayed elevated through mid-year.
But CrossBorder Capital's proprietary tracking, which aggregates central bank balance sheets, shadow banking flows, and credit impulses into a single global liquidity estimate, tells a different story for the fourth quarter.
Michael Howell's October note pegged global liquidity at “touching record highs around $185 trillion but struggling to push higher,” with momentum fading as Fed quantitative tightening, slower People's Bank of China injections, and a less weak dollar bit into the shadow monetary base.
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A Dec. 5 update estimated global liquidity at $187.3 trillion, up $750 billion on the week but still fractionally below the early-November peak, flagging that growth had “recently stalled.”
By Dec. 23, the team said outright that “global liquidity fell again last week,” estimating a $592 billion drop to $186.2 trillion and noting that both short- and long-term growth measures had rolled over.
Howell added that liquidity levels had dipped roughly $1.8 trillion since early November and that the US liquidity cycle appeared to be peaking.
On Howell's own numbers, global liquidity remains near all-time highs, but the fourth quarter has been a phase of flattening-to-mild contraction, not a series of monthly highs.
The level is high. The direction in the fourth quarter is down or sideways.
Net liquidity squeeze
The mechanics that crypto traders track as “net liquidity,” consisting of Fed balance sheet minus Treasury General Account minus reverse repo, clarify what happened domestically.
Federal Reserve balance sheet reports show total assets down about $132 billion over the past two quarters to $6.6 trillion as of late September, with securities holdings falling $126 billion.
A separate Fed report notes the Treasury General Account rose roughly $440 billion since the mid-year debt-ceiling resolution, which, together with quantitative tightening, cut reserve balances by about $450 billion.
At the same time, the Fed's overnight reverse repo facility, which held over $2 trillion in 2022, has fallen to near zero for the first time in years, removing a large buffer.
Further stress now hits reserves directly, which is why occasional spikes in use of the Fed's standing repo facility have appeared and why the Fed effectively ended quantitative tightening and resumed small-scale purchases of short-dated Treasuries in recent weeks.
Layer the dollar on top, with the DXY index dropping roughly 10% over 2025. A weaker dollar usually adds to global dollar liquidity, but Howell explicitly cited the recent dollar “recovery” off absolute lows as one factor weighing on global liquidity momentum into November and December.
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Reconciling the claims
Put together, the reconciled picture shows global liquidity genuinely surging from late 2024 through mid-2025 and remaining at or near record levels, supporting the idea that this Bitcoin cycle has a real liquidity foundation rather than being built on fumes.
But the big positive impulse, especially from draining the Fed's reverse repo facility, is now behind the market.
US net liquidity in the fourth quarter has been flat to mildly negative as quantitative tightening, a fatter Treasury General Account, and the exhaustion of the reverse repo “piggy bank” offset the earlier tailwind.
Howell's high-frequency global liquidity estimates show that since early November, the global aggregate has stopped making new highs and has given back ground.
Both sides are right about their specific claims. Global liquidity hit record highs and remained elevated, while US net liquidity flattened and contracted in the fourth quarter.
The level is still high, but the marginal change has shifted from a strong tailwind to a mixed or slightly soggy one.
That split matters because Bitcoin tends to respond more to the rate of change in liquidity than to the absolute level. A high plateau can sustain prices, but it doesn't drive explosive moves. For that, the market needs acceleration.
Signals that matter for direction
Fed quantitative tightening is over. The Fed effectively stopped shrinking its balance sheet and resumed small Treasury purchases, removing a steady drain on reserves and softening US net liquidity tightening.
The huge reverse repo tailwind is spent.
Most of the extra fuel from money market funds withdrawing cash from the Fed's reverse repo facility has passed. That big boost from 2024 to early 2025 won't repeat.
From here, changes in reserves mostly come from Treasury issuance and Fed operations, not a $2 trillion piggy bank being emptied.
US liquidity is no longer deliberately being squeezed harder, but it's also no longer getting the giant mechanical boost it had.
Treasury issuance mix and the Treasury General Account balance determine whether the government's funding needs add or subtract liquidity.
If the Treasury leans more on bills and lets the TGA drift lower, that effectively feeds cash back into money markets and bank reserves, mildly liquidity-positive. Heavy coupon issuance, plus a higher TGA balance, leans the other way.
Recent quarterly refundings tried to keep this balance market-friendly, but any shift in funding needs or politics could change that.
Fed cuts matter, but context determines whether they help or hurt risk assets. If the Fed cuts into a benign backdrop, consisting of soft inflation, no obvious credit accident, that usually supports risk and can re-steepen curves, helping shadow banking and collateral chains.
If cuts arrive because something breaks, liquidity injections land on top of risk aversion, which is messier. Right now, options markets and forwards still price cuts but not violent panic, so the baseline is a gentle drift toward looser policy, not emergency quantitative easing.
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A sustained weaker dollar is effectively global easing. It relaxes the constraint on non-US borrowers with dollar-denominated debt and tends to go hand in hand with stronger cross-border credit.
A sharp dollar rebound tightens the screws, and the dollar already had a big slide. If that pause turns into a new uptrend, it argues for peak liquidity already passed.
China's People's Bank of China and other emerging market central banks quietly matter for global liquidity through reserve growth, foreign-exchange intervention, and credit impulse.
If Beijing leans harder into stimulus, such as credit quotas, local government support, reserve-ratio cuts, that's another leg of global liquidity support.
If they stay cautious, it's one less offset to a peaking US cycle.
What it means for Bitcoin
The path from here is likely a high plateau with wobble: still-elevated global liquidity that can either gently erode or reaccelerate depending on policy choices and the dollar.
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Meanwhile, Bitcoin is still surfing the high level of liquidity built up earlier in the cycle.
The marginal change in the fourth quarter shifted from a strong tailwind to a mixed or slightly soggy one. The next leg depends less on some monolithic “global liquidity goes vertical again” story and more on how quickly the Fed actually cuts, whether the dollar resumes trending higher, and whether major non-US players start reflating in size.
The data say the liquidity wave that launched this cycle is still rolling, but it's no longer steepening. From here, Bitcoin isn't fighting a full-blown drain, but it also isn't guaranteed fresh fuel unless the Fed, the dollar, and major central banks collectively tilt back toward expansion.
That's not a bearish call. It's a recognition that the easy part of riding the mechanical boost from reverse repo drawdowns and early-cycle liquidity expansion is over. What comes next depends on policy, not plumbing.
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