Why is Crypto Surging Today? Exploring Fed Liquidity and ETF Inflows

Bitcoin's recent surge to $94k after dipping to $84k just two days earlier showcases the impact of Fed liquidity and positive ETF inflows. While broader market sentiment remains bearish, specific factors, such as diminished selling pressure and a shift in Federal Reserve policy, have contributed to this unexpected rally.

Key Takeaways

Bitcoin surged 11.81% over 48 hours, reaching the $94k resistance level.
The recent rally was significantly influenced by positive ETF flows and growing liquidity in the market.
A liquidity injection of $13.5 billion by the Federal Reserve is impacting market sentiments.
The long-term outlook remains cautious, with a bearish trend still applicable.

Why is crypto up today? Fed liquidity, ETF inflows are the catalyst

Bitcoin’s Recent Rally

Bitcoin has experienced a remarkable rise of 11.81% since hitting a low of $84k on December 1, quickly reaching the $94k resistance level. This surge, occurring in just under 48 hours, surprised many traders who had anticipated a continued downward trend. Data from CoinGlass indicated that Bitcoin witnessed liquidations totaling $223 million within the past 24 hours, with approximately $209.5 million related to short positions. The overall crypto market recorded $492.11 million in liquidations, with short positions accounting for approximately $418.53 million.

What’s Driving the Crypto Market Rally This Week?

Despite the recent upsurge, the long-term trend remains bearish, and market sentiment has been pessimistic in recent weeks. The significant move by Bitcoin past the $92k mark and into $94k is noteworthy. Since Bitcoin typically leads the market, analyzing its performance offers insights into the broader crypto trends.

Positive flows into Bitcoin ETFs began on November 25 after a period of heavy outflows, indicating that sellers are currently losing their hold. External factors, such as the tightening monetary policy from the Bank of Japan, have negatively impacted investor sentiments in the U.S., explaining the previous week's losses.

Additionally, the $88k level has emerged as a crucial support threshold according to the CVDD channel indicators. An AMBCrypto report highlights that the ongoing rally is likely fueled by a search for liquidity. Predictions from earlier reports suggested that Bitcoin might push towards $95k.

Another key aspect contributing to the recent price increase is the U.S. Federal Reserve's decision to halt quantitative tightening (QT) on December 1, signaling a shift towards liquidity expansion, potentially sparking the ongoing crypto rally. The Federal Reserve's $13.5 billion injection into the banking system appears to have positively influenced market sentiment, propelling Bitcoin prices higher.

Conversely, it's worth noting that tightening measures from the Bank of Japan have previously led to Bitcoin and broader crypto sell-offs in March 2024, July 2024, and January 2025. As of now, there is an 89.1% likelihood of a 25 basis point rate cut by the U.S. Federal Reserve in December. While the exact trajectory for prices remains uncertain, heightened volatility can be expected in the near term.

Conclusion

In summary, various factors, including Federal Reserve liquidity measures and positive ETF flows, have contributed to the surprising uptick in Bitcoin's value. Although the long-term trends remain cautious, the current environment has sparked excitement among market participants. Understanding these dynamics can help newcomers navigate the complexity of the crypto world.