Bitcoin continues to face significant downward pressure. This paradox has left investors questioning the sustainability of the bull market that saw BTC reach an all-time high above $108,000 in mid-December 2024.
According to recent analysis from Coinbase Institutional, the world’s leading cryptocurrency is experiencing unprecedented challenges that go beyond simple market corrections. The digital asset has broken key bull market support levels, faced massive outflows from spot exchange-traded funds, and witnessed persistent selling from long-term holders. Bitcoin Struggles Despite: often referred to as “whales.” Understanding these dynamics is crucial for investors navigating the volatile cryptocurrency landscape as we move toward 2025.
This comprehensive analysis examines the disconnect between improving liquidity conditions and Bitcoin’s price struggles, explores the fundamental factors weighing on the market, and provides insights into what traders and investors should watch for in the coming months.
The Federal Reserve’s Liquidity Injection and Market Expectations
Fed’s Recent Monetary Policy Shift
The Federal Reserve’s decision to end its quantitative tightening program represents a significant shift in monetary policy. In early December 2024, the Fed injected approximately $13.5 billion into the banking system through overnight operations, marking one of the largest liquidity infusions since the COVID-19 pandemic era. This move signaled a return to more accommodative monetary conditions, which historically have been bullish for risk assets, Bitcoin Struggles Despite: including cryptocurrencies and Bitcoin.
The Fed’s pivot comes at a critical juncture for global markets. After an aggressive tightening cycle that saw interest rates climb to combat inflation, policymakers have begun acknowledging slower economic growth and moderating price pressures. Bitcoin Struggles Despite: The central bank’s balance sheet operations, which expand and contract the money supply, directly influence global liquidity conditions that have historically shown strong correlations with cryptocurrency prices.
Coinbase’s proprietary M2 liquidity index, which tracks money supply growth across major economies, has climbed approximately five percent since April 2024, Bitcoin Struggles Despite: reaching cycle highs. This index has historically led Bitcoin price movements by roughly 110 days, suggesting that expanding liquidity should provide tailwinds for digital assets through early 2025. However, the expected positive impact has yet to materialize in Bitcoin’s price action.
The Historical Relationship Between Liquidity and Bitcoin
Bitcoin has traditionally demonstrated a robust correlation with global liquidity measures. During previous cycles of monetary expansion, particularly the quantitative easing programs following the 2008 financial crisis and the 2020 pandemic response, Bitcoin experienced substantial appreciation. The cryptocurrency gained over 500 percent during the 2019-2021 easing cycle, establishing itself as a macro asset sensitive to liquidity conditions.
The relationship makes intuitive sense: as central banks expand money supply, investors seek alternative stores of value and higher-yielding assets. Bitcoin, with its fixed supply of 21 million coins, presents an attractive hedge against monetary debasement. Moreover, lower interest rates reduce the opportunity cost of holding non-yielding assets like Bitcoin, making the cryptocurrency more attractive relative to traditional fixed-income securities.
Coinbase research indicates that their custom liquidity gauge has maintained correlations with Bitcoin around 0.9 over various lookback periods ranging from one month to three years. This strong relationship underscores why the current disconnect between rising liquidity and struggling Bitcoin prices has caught market participants off guard.
Why Bitcoin Is Struggling Despite Favorable Liquidity Conditions
Breaking Key Support Levels and Technical Breakdown
One of the most concerning developments for Bitcoin bulls is the breakdown of critical technical support levels. After reaching an all-time high above $108,000 on December 16, 2024, Bitcoin experienced a sharp correction exceeding ten percent within days. The cryptocurrency failed to hold the psychologically important $100,000 level, retreating to trade in the mid-$90,000 range by late December.
Technical analysts point to the breach of the 30-day exponential moving average, which had provided consistent support throughout the rally from $67,000 in October. This moving average had not been tested for more than 45 days prior to the recent decline, making its breakdown particularly significant. The Bitcoin price action now faces resistance at former support levels, creating a challenging technical setup for bulls attempting to reclaim higher prices.
The Simple Moving Average indicators in daily timeframes show declining momentum, with the Moving Average Convergence Divergence displaying steady deterioration. For Bitcoin to regain bullish momentum, it must quickly recover above the $100,000 threshold and reestablish support above key exponential moving averages. Additional support exists at the November low near $91,640, which represents a critical line in the sand for maintaining the broader uptrend.
Massive ETF Outflows Signal Waning Institutional Demand
Perhaps the most troubling signal for Bitcoin’s near-term prospects comes from spot exchange-traded fund flows. After experiencing strong inflows throughout most of 2024, spot Bitcoin ETFs have recently faced substantial redemptions. Daily outflows reached approximately $491 million during the late-December correction, representing a dramatic reversal from the sustained inflows that characterized the post-launch period.
The cumulative 20-day ETF flows, while remaining positive at around $6.93 billion, have shown deteriorating momentum. This suggests that institutional appetite for Bitcoin exposure may be softening, at least temporarily. The spot Bitcoin ETF market, which represents 15-20 percent of total daily Bitcoin trading volume across centralized exchanges, plays a crucial role in price discovery and market liquidity.
These outflows coincide with broader risk-off sentiment in traditional markets. The Federal Reserve’s hawkish stance on future rate cuts, signaling fewer reductions in 2025 than markets had anticipated, triggered profit-taking across equity and cryptocurrency markets. Investors who purchased Bitcoin near all-time highs appear to be reassessing their positions as the macro outlook becomes less certain.
Long-Term Holders and Whales Continue Selling Pressure
On-chain analytics reveal another headwind for Bitcoin: persistent selling from long-term holders and large wallet addresses. Data shows that entities holding 10 or more Bitcoin accumulated approximately 63,922 additional coins worth about $6.06 billion during November 2024. However, this accumulation pattern appears to have stalled following the December peak, with some indicators suggesting these same holders began distributing into strength.
The Spent Output Profit Ratio, which tracks whether Bitcoin being moved on-chain is being sold at a profit or loss, currently hovers around 1.15. While this indicates most sellers are realizing gains rather than capitulating, it also suggests limited conviction among long-term holders. In sustainable bull markets, SOPR typically remains elevated as holders refuse to sell at losses, supporting continued upward momentum.
Treasury activity and daily active transactions on the Bitcoin network have also shown signs of slowing. The velocity of Bitcoin movement, which accelerated during the November-December rally, has moderated significantly. This reduced network activity suggests decreasing speculative interest and potentially fading momentum in the cryptocurrency market.
Options Market Sentiment Turns Increasingly Bearish
The Bitcoin options market provides additional insight into deteriorating sentiment. Options skew, which measures the relative pricing between put and call options, has shifted toward puts, indicating traders are paying premiums for downside protection. This represents a notable change from the extremely bullish sentiment that prevailed when Bitcoin was approaching $100,000.
Implied volatility has also spiked, reflecting increased uncertainty about near-term price direction. Higher volatility typically accompanies market turning points, as disagreement among participants about fair value intensifies. The options market currently prices in wide potential ranges for Bitcoin over the next 30-60 days, suggesting traders are positioning for continued turbulence.
Analyzing Fundamental: Bitcoin Struggles Despite
Understanding Bitcoin’s On-Chain Health Indicators
Despite the negative price action, several fundamental on-chain metrics suggest Bitcoin’s underlying network health remains robust. Approximately 85 percent of Bitcoin’s circulating supply is held by long-term wallets that haven’t moved their coins in over 155 days. This high percentage of dormant supply indicates strong conviction among a substantial portion of holders, limiting the available supply that could contribute to selling pressure.
The Market Value to Realized Value ratio currently sits around 2.5, which historically represents mid-cycle valuation rather than extreme overvaluation. During previous bull market peaks, MVRV ratios exceeded 3.5-4.0, suggesting Bitcoin may have room for further appreciation once macro headwinds subside. Similarly, the Puell Multiple, measuring miner revenue relative to historical averages, hovers near 1.3, indicating miners are profitable but not experiencing the excessive revenues characteristic of late-stage bull markets.
Exchange balances continue their long-term declining trend, with approximately 1.83 million Bitcoin held on centralized exchanges. This represents a multi-year low and reflects the growing trend of self-custody and institutional accumulation through regulated vehicles like ETFs. Lower exchange balances typically reduce readily available sell-side liquidity, potentially supporting prices during periods of increased demand.
The Role of Stablecoin Supply in Crypto Market Liquidity
Stablecoin circulation provides a real-time indicator of capital flows within the cryptocurrency ecosystem. Total stablecoin supply reached a record $265 billion by late 2024, with trailing 30-day growth running at approximately five percent. This expansion represents fresh on-chain liquidity that could potentially fuel future buying pressure across digital assets, including Bitcoin and Ethereum.
Growing stablecoin issuance suggests capital is flowing into rather than out of the crypto ecosystem, providing incremental buy-side firepower. However, the growth rate has moderated from the double-digit monthly increases seen in early 2024, indicating enthusiasm may be tempering. The composition of stablecoin demand also matters: institutional users seeking trading liquidity versus retail investors preparing to purchase cryptocurrencies represent different market implications.
The expansion of payment use cases for stablecoins, particularly USDC, through banking partnerships and blockchain payment networks, contributes to supply growth independent of speculative demand. This utility-driven issuance provides a more stable foundation for the crypto market infrastructure, though it may not directly translate to Bitcoin buying pressure.
Macroeconomic Crosswinds and Global Market Dynamics
Interest Rate Expectations and the Dollar Strength
The Federal Reserve’s December 2024 policy meeting revealed a more hawkish stance than markets anticipated. While delivering an expected 25 basis point rate cut, the Fed’s updated projections showed only two additional cuts anticipated for 2025, down from earlier expectations of four or more reductions. This hawkish surprise triggered a broad risk-off response across markets, with the dollar index spiking and risk assets retreating.
A stronger US dollar creates headwinds for Bitcoin, which is primarily priced and traded in dollars. When the dollar appreciates, Bitcoin and other commodities typically face selling pressure as they become more expensive for international buyers. The dollar’s recent strength, combined with declining copper-to-gold ratios, suggests investors are positioning defensively despite improving liquidity conditions.
The Fed’s cautious approach reflects persistent inflation concerns and a resilient labor market that has exceeded expectations. While economic data show emerging cracks, including downward revisions to employment figures and purchasing manager indices falling below 50, the central bank appears reluctant to ease aggressively. This creates an uncomfortable middle ground where growth slows but policy support remains limited.
Global Economic Indicators and Risk Appetite
Beyond US monetary policy, global economic indicators present a mixed picture. China’s recent fiscal and monetary stimulus measures, while substantial, have yet to produce the kind of economic acceleration that would support risk assets broadly. The transmission of these policies through the global economy typically takes months, meaning any positive effects may not manifest until mid-2025.
Corporate earnings have shown signs of stress, with second-quarter results being punished more severely than usual for misses. High-yield credit spreads remain tight, suggesting credit markets aren’t signaling imminent distress, but selective risk appetite in equity markets creates an uncertain environment for highly volatile assets like Bitcoin. Investors appear to be differentiating more carefully between various risk exposures rather than embracing a broad risk-on stance.
The geopolitical landscape adds another layer of uncertainty. Tariff concerns, international conflicts, and political developments all contribute to volatility that can overwhelm positive liquidity signals. Bitcoin, which trades 24/7 across global markets, often serves as a sensitive barometer for broad risk sentiment, amplifying moves in either direction.
Coinbase’s Perspective on Bitcoin’s Medium-Term Outlook
The 110-Day Liquidity Lead Time Theory
One of Coinbase’s key analytical frameworks suggests patience may be warranted despite current struggles. Their research indicates global liquidity expansion leads Bitcoin price appreciation by approximately 110 days. Given that their M2 liquidity index reached new cycle highs in late 2024, this would imply favorable conditions for Bitcoin heading into early 2025, assuming the historical relationship holds.
This lagged relationship reflects the time required for liquidity to flow through the financial system and eventually reach digital asset markets. Traditional assets typically absorb liquidity first, with flows eventually rotating toward higher-risk, higher-volatility assets like cryptocurrencies. If this pattern repeats, the current consolidation could represent a mid-cycle pause rather than the end of the bull market.
However, Coinbase analysts acknowledge that historical relationships can break down, particularly during periods of structural market changes. The introduction of spot Bitcoin ETFs represents a fundamental shift in how institutional capital accesses cryptocurrency markets, potentially altering traditional flow patterns and correlation structures.
Comparing Current Conditions to Previous Bull Markets
Historical analysis provides important context for evaluating Bitcoin’s current position. During the 2017 and 2021 bull markets, Bitcoin experienced multiple corrections exceeding 20-30 percent before ultimately reaching new highs. The current pullback from $108,000 to the low-$90,000 range represents a similar magnitude decline, suggesting this could be a normal mid-cycle consolidation rather than a trend reversal.
Previous bull markets also featured periods where improving fundamentals and liquidity conditions failed to immediately translate to higher prices. During these consolidation phases, Bitcoin built strong support levels and allowed overextended positions to clear before resuming upward momentum. The current market structure, with 85 percent of supply in long-term holder wallets and declining exchange balances, suggests a solid foundation exists for future appreciation.
That said, each cycle presents unique characteristics. The 2024-2025 cycle features unprecedented institutional participation through ETFs, different global economic conditions, and evolved regulatory frameworks. While historical patterns provide guideposts, investors must remain attuned to new dynamics that could produce outcomes differing from previous cycles.
The Impact of Bitcoin ETFs on Market Dynamics
How Spot ETFs Changed Bitcoin’s Market Structure
The January 2024 approval of spot Bitcoin ETFs in the United States represented a watershed moment for cryptocurrency markets. These products attracted approximately $9.6 billion in net inflows during their first two months, with total assets under management reaching $55 billion. This institutional demand provided substantial support for Bitcoin’s rally throughout 2024.
Spot ETFs fundamentally altered Bitcoin’s market dynamics by establishing a new anchor for sustainable demand. In previous cycles, liquidity constraints and limited institutional access created boom-bust patterns as market participants struggled to enter and exit positions efficiently. ETFs promised to absorb supply in a gradual, sustained manner, potentially reducing volatility and supporting higher valuations.
However, the recent ETF outflows demonstrate these vehicles are not one-way demand sources. When risk appetite wanes, ETF investors can redeem shares as easily as they created them, potentially amplifying downside moves. The daily trading volume in Bitcoin ETFs, representing $4-5 billion during active periods, now represents significant market impact that can override other supply-demand factors.
ETF Flows as a Real-Time Sentiment Indicator
Bitcoin ETF flows have emerged as a crucial real-time indicator of institutional sentiment. Unlike on-chain metrics, which can be difficult to interpret or have lagged reporting, ETF flows provide clear, same-day signals about capital allocation decisions among professional investors. The shift from sustained inflows to significant outflows in late December offered an early warning of deteriorating sentiment before it fully manifested in spot prices.
Analysts now closely monitor cumulative flow trends across multiple timeframes. While 20-day cumulative flows remain positive at around $6.93 billion, the deceleration in inflow rates and emergence of meaningful outflow days suggests shifting dynamics. If outflows persist or accelerate, they could signal more substantial institutional de-risking that would create additional selling pressure.
The relationship between ETF flows and Bitcoin’s price isn’t perfectly linear. During periods of high volatility, flows can lag price movements as investors wait for clarity. Conversely, persistent flows in one direction can ultimately overwhelm short-term technical factors. Understanding this interplay has become essential for interpreting Bitcoin’s price action in the ETF era.
What Investors Should Watch Going Forward
Key Technical Levels and Support Zones
For traders and investors monitoring Bitcoin’s near-term trajectory, several technical levels warrant close attention. The $91,640 level, representing the November low, serves as critical support. A decisive break below this zone would confirm a deeper correction may be underway, potentially targeting the October range around $67,000-$75,000.
On the upside, Bitcoin needs to reclaim and hold $100,000 to restore bullish momentum. Beyond that psychological level, resistance exists at $101,500 and the recent all-time high near $108,000. Successfully breaking above and establishing support above these levels would signal the correction has concluded and new highs may be achievable.
The behavior of moving averages also provides important context. Watch for whether Bitcoin can stabilize above its 50-day moving average and whether the 200-day moving average continues providing long-term support. These widely-followed indicators often become self-fulfilling as traders use them for entry and exit decisions.
Monitoring Fed Policy and Liquidity Indicators
Federal Reserve communications and policy decisions will remain central to Bitcoin’s outlook. Investors should closely follow economic data releases, particularly inflation reports and employment figures, as these drive expectations for future rate policy. Any pivot toward more aggressive easing would likely support Bitcoin, while continued hawkishness could extend the current consolidation.
Beyond official Fed policy, market-based liquidity indicators deserve attention. Monitor the Coinbase M2 liquidity index, global central bank balance sheets, and money supply growth across major economies. If these indicators continue expanding while Bitcoin remains suppressed, it would strengthen the case that current weakness represents a buying opportunity before liquidity effects manifest with the typical 110-day lag.
Credit market conditions also warrant monitoring. Widening high-yield spreads would signal genuine economic stress that could overwhelm positive liquidity signals. Conversely, tight spreads alongside expanding liquidity would reinforce the constructive long-term thesis despite near-term volatility.
On-Chain Metrics to Track Market Health
Several on-chain metrics provide valuable insights into Bitcoin’s fundamental health independent of price action. Continue monitoring the percentage of supply held by long-term holders, currently around 85 percent. If this declines significantly, it would suggest conviction is wavering among core holders. Conversely, increasing percentages indicate strengthening hands despite price volatility.
Exchange balances represent another critical metric. Ongoing declines in Bitcoin held on exchanges suggest continued accumulation and self-custody trends that reduce available supply. Sudden reversals, with large amounts flowing onto exchanges, could foreshadow increased selling pressure.
Finally, watch miner behavior through metrics like hash rate, difficulty adjustments, and miner wallet balances. Miners represent a constant source of selling pressure as they monetize newly mined Bitcoin to cover operational costs. If miners begin holding more Bitcoin rather than immediately selling, it could signal confidence in higher future prices.
The Broader Implications for Cryptocurrency Markets
Bitcoin’s Role as a Market Leader
Bitcoin’s struggles have implications beyond the largest cryptocurrency itself. As the dominant digital asset representing over 50 percent of total cryptocurrency market capitalization, Bitcoin typically leads broader market trends. When Bitcoin consolidates or corrects, altcoins usually experience amplified volatility, often declining more severely on a percentage basis.
The current environment has seen mixed performance across the cryptocurrency landscape. Some altcoins, particularly those with strong fundamental developments or upcoming catalysts, have maintained relative strength. However, the broad market remains closely correlated with Bitcoin’s direction, suggesting a sustained Bitcoin rally would be necessary to support an extended altcoin season.
Ethereum, the second-largest cryptocurrency, has shown somewhat better resilience than Bitcoin in recent weeks. Some analysts interpret this as capital rotation within crypto markets, with investors seeking alternatives during Bitcoin’s consolidation. However, Ethereum’s performance typically follows Bitcoin with a lag, meaning sustained Bitcoin weakness would eventually pressure ETH as well.
Institutional Adoption Continues Despite Volatility
While near-term price action has disappointed, the broader trend toward institutional cryptocurrency adoption continues. Major financial institutions have expanded their digital asset offerings, corporate treasuries have added Bitcoin to balance sheets, and regulatory clarity has improved in key jurisdictions. These structural developments support long-term bullish arguments even as short-term volatility persists.
The maturation of cryptocurrency infrastructure, including custody solutions, trading platforms, and financial products, reduces barriers to institutional participation. Each market cycle has featured progressively greater institutional involvement, and this trend appears intact despite current challenges. Temporary setbacks in risk appetite don’t reverse multi-year structural trends toward digital asset integration in traditional finance.
Moreover, the growing use cases for blockchain technology beyond speculative trading continue expanding. Tokenization of real-world assets, decentralized finance applications, and cryptocurrency payment networks all represent areas of genuine innovation and adoption that transcend Bitcoin’s price fluctuations.
Conclusion
Bitcoin finds itself in a perplexing situation where improving liquidity conditions and favorable long-term fundamentals conflict with challenging near-term price action. Bitcoin Struggles Despite: The cryptocurrency has broken key support levels, faced substantial Bitcoin Struggles Despite: ETF outflows, and weathered persistent selling from large holders despite the Federal Reserve’s Bitcoin Struggles Despite: liquidity injection and end of quantitative tightening.
The disconnect between rising global liquidity and struggling Bitcoin prices highlights the complexity of cryptocurrency markets. Bitcoin Struggles Despite: While historical patterns suggest expanding liquidity should eventually support higher prices with a typical 110-day lag, Bitcoin Struggles Despite: numerous headwinds currently outweigh these positive factors. Hawkish Federal Reserve guidance, Bitcoin Struggles Despite: dollar strength, deteriorating risk appetite, and technical breakdown have combined to pressure Bitcoin despite an ostensibly favorable macro backdrop.
For investors, the current environment demands careful analysis of multiple factors. Technical support levels, ETF flows, on-chain metrics, and evolving Fed policy all provide pieces of the puzzle. Those maintaining a long-term bullish thesis can point to strong fundamentals, Bitcoin Struggles Despite: expanding liquidity, and historical precedent for mid-cycle corrections. Bitcoin Struggles Despite: Conversely, near-term traders must respect the bearish technical setup and wait for confirmation of trend reversal before aggressively accumulating.
The coming months will reveal whether Bitcoin’s struggles represent a temporary consolidation before resuming its uptrend or the beginning of a more substantial correction. Bitcoin Struggles Despite: The answer likely depends on whether improving liquidity conditions ultimately outweigh macro headwinds and whether institutional demand through ETFs stabilizes after recent outflows. Bitcoin Struggles Despite: Regardless of near-term volatility, the long-term trajectory of cryptocurrency adoption and the role of Bitcoin as a macro asset appear intact, even as the path forward remains uncertain.
FAQs
Q: Why is Bitcoin struggling despite increased Fed liquidity?
Bitcoin is struggling despite Federal Reserve liquidity injections due to several offsetting factors. The Fed’s hawkish stance on future rate cuts has strengthened the dollar and reduced risk appetite. Additionally, Bitcoin faces massive spot ETF outflows, Bitcoin Struggles Despite: persistent selling from long-term holders, bearish options market sentiment, Bitcoin Struggles Despite: and broken technical support levels.
Q: What are the key support levels Bitcoin investors should watch?
Critical support for Bitcoin exists at $91,640, representing the November 2024 low. A break below this level would suggest a deeper correction toward the Bitcoin Struggles Despite: October range of $67,000-$75,000. For bullish momentum to resume, Bitcoin needs to reclaim $100,000 and establish support above this psychological level. Additional resistance exists at $101,500 and the recent all-time high near $108,000.
Q: How do Bitcoin ETF flows impact cryptocurrency prices?
Bitcoin ETF flows significantly impact prices by representing institutional demand and providing real-time sentiment indicators. Daily ETF trading volumes of $4-5 billion represent 15-20 percent of total Bitcoin exchange volume, making them a major market force. Bitcoin Struggles Despite: Sustained inflows absorb supply and support prices, while outflows, which reached approximately $491 million daily in late December, create selling pressure.
Q: What is the 110-day liquidity lead time theory?
The 110-day liquidity lead time is Coinbase’s analytical framework, suggesting that changes in global liquidity conditions lead Bitcoin price movements by approximately 110 days. Their custom M2 liquidity index tracks money supply growth across major economies. Bitcoin Struggles Despite: Since this index reached cycle highs in late 2024, the theory suggests favorable conditions for Bitcoin heading into early 2025.
Q: Are Bitcoin’s long-term fundamentals still strong despite recent struggles?
Yes, several fundamental indicators suggest Bitcoin’s long-term health remains robust. Approximately 85 percent of the circulating supply is held in long-term wallets, Bitcoin Struggles Despite: exchange balances continue declining to multi-year lows, and the Market Value to Realized Value ratio of 2.5 indicates mid-cycle rather than extreme overvaluation. Stablecoin supply has reached record levels at $265 billion, providing potential buying power.
