- Crypto markets desperately need the support of United States Federal reserve especially it’s ability to cut interest rates within the United States.
- Lower interest rate rates increases the supply of money in the economy, which eventually makes it into crypto markets lifting prices.
- We expect that US Federal Reserve to cut rates by 1.5% in 2026 to help the government monetize its deficit as well as fund the old federal debt.
Worst Liquidity Crisis Yet for Crypto Markets
Cryptocurrency markets have been seen one of the worst phases of liquidity crisis since the Fed started increasing interest rate rates from March 2023. Since then we have seen a continuous phase of decline despite some recovery after the 2024 elections however even that got dispersed once the liquidity crisis hit the market again.
The current liquidity crisis began a few years after the 2021 COVID stimulus checks, due to which crypto markets had their best rally ever. Soon after the market saw fed hike rates due to high inflation, which at one point of time crossed 10% in the USA. Seeing this ultra high inflation, the United States Federal reserves started raising interest rates since March 2023 ending in July 2024. By 2024, the Effective Federal Funds rate was already at a high of 5.75% one of the highest since the 2008 global financial crisis.
However, a Fed intervention in July and September 2024 cut the interest rates by 0.5% and 0.25% respectively, saving the crypto markets and stock markets from a liquidity crunch. The next round of cuts came around Sep-Dec 2025 when a total of 0.75% rate cut was done in three subsequent Fed meetings.
Since then there has been no change in the rates which have been kept constant at 3.75%, still higher than the historic US average.
As a result of this crisis, the bond markets are more attractive to the less risk pro investor, which includes institutions as well, and they have been withdrawing liquidity from the volatile market, such as crypto and investing those funds in the safer markets. Added to this the gold rally of 2025-26 has also led to sucking away liquidity from the crypto markets.
At present the need for a rate cut is much higher because, it introduces liquidity into the market, which eventually makes it into cryptocurrencies, when retail buyers and institutions invest.
What Happens when Fed Starts Printing?
When the Federal Reserve lowers the interest rates, banks, which borrowed from the federal reserve can lend at a lower interest rate which then attracts investors businesses and governments to do more capital spending. As a result, new money flows into the markets through salaries, purchases, acquisitions and similar activities.
Printing refers to the act of lowering down of interest rates so that new money which has been issued by the federal reserve and old money which has invested in Federal Reserve treasuries are released into the market and they flow into higher return (volatile) assets, such as cryptocurrencies.
Here, new money is the money which the government takes from the federal reserve as a loan to fund their budget deficit. Similarly, old money is the money invested into US Treasury Bonds by retail institutional investors.
When will Bitcoin Cross $100k?
Bitcoin crossing $100k depends on several factors such as the end of global trade crisis, which has been worsen by the blocking of Maritime routes during the US-Iran conflict, the supply of crude oil across the world, the liquidity crisis, which has been discussed in the previous section, and the sectorial investor rotation, which currently favors gold.
Among them, we have given liquidity crisis the most importance because it introduces new money which is used to purchase Bitcoin eventually driving its price higher.
Based on our historic observation of the United States Federal reserve we believe there is a possibility of a rate cut around June 16-17, 2026 because of a new Federal Reserve Chairman Kevin Warsh and the need of repurchasing of US treasury bonds by the federal reserve to monetize the budget deficit of the current year as well as the renewal of US debt of previous years.
No Rate Cut Scenario in 2026
The lack of a rate cut above 1% in 2026 can cause Bitcoin to attempt $100,000 level levels but the pressure of selling might cause it to fall back to $90,000 multiple times.
Disclaimer: BFM Times acts as a source of information for knowledge purposes and does not claim to be a financial advisor. Kindly consult your financial advisor before investing.
