The post Why Bitcoin Is Reacting More to Liquidity Than to Interest Rate Cuts appeared on BitcoinEthereumNews.com.

Key takeaways Bitcoin now responds more to liquidity than to rate cuts. While rate cuts once drove crypto rallies, Bitcoin’s recent price action reflects actual cash availability and risk capital in the system, not just borrowing costs. Interest rates and liquidity are not the same. Rates measure the price of money, while liquidity reflects the amount of money circulating. Bitcoin reacts more when liquidity tightens or loosens, even if rates move in the opposite direction. When liquidity is abundant, leverage and risk-taking expand, pushing Bitcoin higher. When liquidity contracts, leverage can unwind quickly, which has often coincided with sharp sell-offs across stocks and commodities. Balance sheets and cash flows matter more than policy headlines. The Fed’s balance sheet policy, Treasury cash management and money market tools directly shape liquidity and often influence Bitcoin more than small changes in policy rates. For years, US Federal Reserve interest rate cuts have been a key macro signal for Bitcoin (BTC) traders. Lower rates typically meant cheaper borrowing, boosted risk appetite and sparked rallies in crypto. However, that classic link between Fed rate cuts and Bitcoin trading has weakened in recent months. Bitcoin now responds more to actual liquidity levels in the financial system than to expectations or incremental changes in borrowing costs. This article clarifies why anticipated rate cuts have not pushed up Bitcoin recently. It explains why episodes of liquidity constraint have triggered synchronized sell-offs across crypto, stocks and even precious metals. Rates vs. liquidity: The key difference Interest rates represent the cost of money, while liquidity reflects the quantity and flow of money available in the system. Markets sometimes confuse the two, but they can diverge sharply. The Fed might lower rates, yet liquidity could still contract if reserves are drained elsewhere. For instance, liquidity can tighten through quantitative tightening or…

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Filed under: News - @ February 12, 2026 5:27 am