Bitcoin (BTC/USD) Drops 14% as Receding Liquidity Tests the Post-Election Rally

Bitcoin (BTC/USD) is down 14% over the past seven days, prompting experts to debate about the role receding liquidity is playing in this correction.

Bitcoin BTC/USD is trading lower in the last 24 hours after recent price action saw the cryptocurrency fall 14% over the past seven days. As such, experts are weighing in on what role receding liquidity might be playing in the correction.

What Happened: In a detailed thread on X on Thursday, UnlimitedFnds Chief Investment Officer Bob Elliott pointed out that the post-election crypto rally has faded, with many assets completing full round trips from their highs.

As part of the post-election rally, Bitcoin surged to a high of $73,000 in March before dropping to lows of $60,000 this week. This marks a 20% correction from the post-election peak.

As for what happened, Elliott explained that while crypto markets have shown strength in recent months, the tide appears to be turning.

"The post-election crypto rally has faded with most assets completing a full round trip from their highs. This early stage of 2024 saw a brief but intense period of excess liquidity following the FTX collapse and subsequent bailouts, which benefited crypto as a primary risk asset," Elliott said in part.

"The crypto downturn may be an early warning sign of broader liquidity conditions deteriorating. Crypto typically benefits first and most from periods of excess liquidity, making it a leading indicator for risk assets. With the financial system awash in liquidity for the past 18 months, it's no surprise that crypto markets have also seen their fair share of capital inflows."

Later in the thread, Elliott added that the bulk of the recent market moves are now complete, and that the time frame for the next stage of the market is 2025 when we may see some serious financial strain.

"The visualization shows the complete reversal of crypto-related equities (e.g., Strategy MSTR) and a full return trip for major coins like Ethereum ETH/USD and Solana SOL/USD from their post-election peaks," Elliott explained.

"Even speculative assets like Fartcoin FARTCOIN/USD (yes, you read that right) and Trump-themed cryptocurrencies are now struggling to hold onto their recent gains. This broad-based weakness signals a potential shift in market trends."

If liquidity continues to drain and we move into 2025 with markets still at all-time highs in a no-liquidity world (which is a possibility if the Fed continues to hike), then we may see some serious financial strain as the music stops and no chairs remain.

If we do move into 0 liquidity with markets at all-time highs, it may spell doom for the stock market as the time frame for the next stage of the market is 2025

CryptoQuant CEO Ki Young Ju added that high spot volume at $100,000 is being seen but that Bitcoin is now facing a liquidity test.

"If no fresh capital flows in, BTC might get locked in the $75,000-$100,000 range until a major catalyst sparks demand again," Ki Young Ju stated.

If the price drops below $75,000, it might indicate a deeper correction, especially if it falls below $70,000, according to the crypto analyst.

See More: Best Cryptocurrency Scanners

What Next: Bitcoin is known for its volatility and rapid price movements. The cryptocurrency has been a subject of much debate, with some experts remaining skeptical of its long-term viability while others see it as a promising innovation.

As the cryptocurrency market continues to evolve, it will be interesting to observe how Bitcoin performs in the coming months and how its price action is influenced by macroeconomic trends and institutional adoption.

Now Read: Is Bitcoin Bottom Bounded By $60,000 Level As Experts Remain Divided On Next Move