Bitcoin: Analyzing Liquidity Signals That Indicate a Price Recovery in 2026

Bitcoin has been experiencing downward pressure in the market, presently trading at $87.4k, significantly lower than its peak of nearly $126k. However, indications suggest that this selling pressure may be easing, with patterns signaling potential exhaustion and improving liquidity conditions that could invite capital back into the market. Such changes may enhance the overall recovery outlook for Bitcoin.

Key Takeaways

Bitcoin's recent price decline from its all-time high of nearly $126k has been influenced by multifaceted bearish factors.
Structural patterns hint at a potential bullish turnaround for Bitcoin, with a possible multi-week recovery.
Macro-economic factors, including a cooling inflation trend, could positively impact Bitcoin's liquidity conditions and capital inflows.
Spot investors continue to accumulate Bitcoin, indicating sustained underlying demand, with recent purchases totaling around $3.72 billion.

Bitcoin - Analyzing Liquidity Signals That Indicate a Price Recovery in 2026

Understanding Bitcoin's Structural Exhaustion

Bitcoin's downturn can be attributed to several bearish influences that have converged on the market. This decline began on October 29, triggered by a major liquidation event that saw around $19 billion exit the market. This situation was exacerbated by a hawkish stance from the Federal Open Market Committee (FOMC), prompting institutional investors to decrease their holdings, resulting in a record outflow of $903 million worth of Bitcoin.

Recent analysis from 10xResearch suggests this environment has driven investors towards assets promising stronger short-term returns, which likely explains the recent surges in traditional safe-haven assets like gold and silver.

Source: 10xResearch

Despite the current challenging market conditions, analysis indicates that Bitcoin may be nearing a bullish turning point, with potential for a multi-week recovery. Presently, structural patterns reflect that a breakout above the descending resistance line could catalyze an upward movement.

Evaluating Potential Rebound Conditions

There is a significant chance that Bitcoin could rebound as we approach the new year. A recent analysis by Milk Road compared one-year inflation swaps with five-year forward breakeven inflation swaps, revealing a growing divergence in long-term inflation expectations. This shift may bode well for Bitcoin, even though scenarios like this are relatively uncommon.

The report suggests that as inflation is expected to cool during the first half of 2026, the Federal Reserve may have the opportunity to reduce interest rates further.

Source: MilkRoad

A decrease in inflation could restore liquidity to risk assets, including Bitcoin. However, ongoing long-term inflation risks may still impede a swift return of capital. It's also noted that a recent U.S. government shutdown has reduced market liquidity, but the potential for recovery remains high. The analysis suggests the Federal Reserve could inject up to $40 billion into the markets each month through April via reverse repo management.

Lastly, it's emphasized that quantitative easing has commenced, and should inflation continue to decline, further rate cuts could follow — an event that would likely boost capital flows into cryptocurrencies.

Continued Support from Spot Investors

Despite recent price declines, spot investors continue to accumulate Bitcoin, indicating a strong underlying demand. Data from CoinGlass shows that since early December, spot market participants have gradually increased their holdings, amounting to approximately $3.72 billion in total purchases over the last four weeks.

Bitcoin spot market chart
Source: CoinGlass

Overall, continued accumulation in the spot market paired with improving macroeconomic and structural conditions may bolster Bitcoin's recovery and heighten the possibility of approaching its previous all-time high of $126,000.

Conclusion

The combination of improving liquidity conditions, investor accumulation, and potential macroeconomic easing may set the stage for Bitcoin's price recovery in the coming year. Investors will be closely watching for these signals to determine the market's next moves.