Bitcoin Drops to $113K as U.S. Liquidity Squeeze Worsens

Bitcoin fell to $113,000, 8.5% lower from its record high of $124,000. The decline is not being caused by issues in the world of cryptocurrencies, but by an even larger player in the world of finance — a $400 billion liquidity draw by the U.S. Treasury.The Treasury’s efforts to replenish its General Account (TGA) through issuing debt are draining money from the markets. Stocks are holding up on strong earnings, but Bitcoin and the rest of the cryptos are bearing the bulk of it.Liquidity is what powers financial markets, and it is being drained out at scale right now. U.S. Treasury activities to fund are absorbing hundreds of billions, drawing fewer dollars from the system.Equities remain relatively supportive, having been softened by strength in corporate earnings. Crypto isn’t so softened, though. That leaves us with higher volatility, with Bitcoin being more sensitive to shifting liquidity than other assets.That has again reopened the debate of whether Bitcoin is behaving as a hedge in the vein of gold, or whether it’s still a high-risk asset that goes up and down with global liquidity flows.Similar to on trading websites and social media platforms, the retail sentiment has become extremely bearish. The majority of individual investors feel that the correction is signaling the start of a long-term bear market.

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