Why has Bitcoin dumped 50% while global liquidity has increased?

Most analysts blame Bitcoin’s poor performance on a lack of liquidity, but there’s more to it than just that.

Bitcoin’s 50% decline from all-time highs in just four months comes at a time when global liquidity has increased, contradicting the general premise that price follows liquidity.

“The difference is striking and requires explanation,” said Chris Tipper, chief economist and strategist at Ainslie Group. Global liquidity has increased by about $5 trillion since Bitcoin’s peak in October and now stands at almost $190 trillion, according to Ainslie Wealth.

However, this is driven by the People’s Bank of China, which has added $1 trillion in 2025 and likely another trillion this year. said Tipper.

Chinese prefer gold over Bitcoin

Chinese liquidity does not flow into Bitcoin (which is banned), but into gold reserves, domestic infrastructure and the real economy, he added.

“So if you ignore the Chinese contribution and just look at the Western liquidity that Bitcoin is actually responding to, momentum peaked in October and has been slowing since then.”

Gold markets responded, hitting an all-time high in late January, with precious metals trading down just 5% from today’s peak. Bitcoin reacted to the western component and corrected.

“Two assets, same liquidity figure, opposite performance, fully explained by the split.”

The economist concluded that when Western liquidity momentum accelerates again, whether due to a Federal Reserve response to market stress, dollar weakness or a “disorderly event that forces intervention,” Bitcoin has significant ground to recover.

The US Dollar Index (DXY), as a ‘rough measure of Western liquidity, seems to support your argument’. commented Abra CEO and Algorand Chairman, Bill Barhydt.

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The DXY has recovered in recent days following the escalation of military attacks in Iran. From a low of 97.5 in late February, it climbed to 99.6 on Tuesday as the dollar strengthened. according to to TradingView. A stronger dollar is also bad news for the Bitcoin markets.

BTC Price Outlook

At the same time, Bitcoin fell below $67,000 again in late trading on Tuesday, but managed to recover to $68,500 in Asia on Wednesday morning.

The assets have encountered heavy resistance at $70,000 and are unlikely to break above that until Western liquidity improves through Fed rate cuts or more money printing.