On the last day of 2025, while most traders were half watching the fireworks and half pretending they weren’t checking the charts, the quietest corners of the financial system began to stir.
On Dec. 31, banks withdrew a record amount of approximately $74.6 billion in cash from the Federal Reserve’s SRF. The numbers are important because the standing repurchase facility is a pressure valve for the Fed, which banks use to exchange high-quality collateral for overnight cash, and is typically used most heavily when private capital markets are tight.
If you read enough about cryptocurrencies, you’ll find that Bitcoin not only trades based on narrative, but also on oxygen. Fluidity is oxygen. When there’s a shortage, everything feels heavy, bids are diluted, rallies struggle, and every drop seems steeper than it needs to be.
That’s why not only igcurrencynews, but many macro-focused accounts, including Kobeissi, flagged the year-end surge in repos as a sign of stress.
But the Kobisi letter suggests something else: a shift in liquidity trends in risk assets, including Bitcoin, could occur sooner than people expected.
The rapid increase in repos was a symptom, and the Fed’s response was the deciding factor.
Year-end stress in funding markets occurs almost every year, with banks wanting to keep their balance sheets clean by reporting dates and withdrawing from lending, cash availability decreasing and short-term interest rates likely to fluctuate.
This time the shaking was big. In addition to record SRF usage, funds also flooded into the Fed’s reverse repurchase facility, which reached $106 billion on the same day. This is another typical “safety play” behavior when balance sheets are under stress.
As we head into 2026, what matters is what happens next. That’s because the Fed was already on the move before the year-end rally hit the headlines.
On December 12, the New York Fed began buying Treasury bills in the form of approximately $40 billion in reserve management purchases, with the goal of keeping reserves ample. It sounds boring, and it should be. These purchases are being touted as maintenance, and the Fed says it wants the pipes to run smoothly and interest rate plumbing to work.
The market tends to treat this hold as a signal, as the direction of margin liquidity changes.
A month earlier, the Fed also confirmed that starting Dec. 1, it would halt outflows of its holdings, effectively ending continued outflows due to quantitative tightening. I wouldn’t call this a pivot by any means, but the balance sheet stopped shrinking and started growing in a targeted way.
This order is important, and it matters to Bitcoin as well. Because Bitcoin’s relationship with macros has matured over the past two years.
The ETF era has drawn BTC deeper into traditional market flows, and the market is now monitoring the same plumbing signals that credit traders are monitoring.
Why this kind of “piping stress” turns into “piping support”
If you want the simple version, just because banks borrowed $74.6 billion from the SRF doesn’t automatically mean their liquidity is improving.
This means they chose to borrow from the Fed because they felt money was tight enough, but that could be for seasonal reasons, deeper reasons, or both.
What signals improved liquidity in early 2026 is the Fed’s willingness to address reserve shortfalls, and the Fed is doing so using balance sheet tools rather than speeches.
The New York Fed’s RMP statement also suggests that non-reserve debt tends to rise sharply around April and should continue to rise “for several months.” This line is important for those trying to time liquidity situations. The Fed has indicated it expects this support to continue into early spring.
Simply put, the Fed is trying to keep enough cash in the system to prevent banks and dealers from reaching a point where they start rationing liquidity and potentially spilling it into the broader market.
Market depth increases when dealers are able to fund their positions smoothly. As the market becomes thicker, it doesn’t take as much force to move prices. Bitcoin tends to like that world.
Why traders care about pipes
Most people experience “fluidity” just like the weather. They cannot see it directly, but they feel it in the air.
In crypto, this sentiment manifests itself as a thin weekend, a sharp wickdown, and a rally that looks strong until it hits a wall of sellers waiting for a rebound.
In traditional finance, this sentiment manifests itself in skyrocketing repo rates, bank exits, and suddenly everyone starts talking about a system that almost no one outside the fixed income industry has heard of.
The stress of year-end fundraising is usually a no-brainer. This has a longer tail as it connects to a larger theme and reserves are tight again.
Volatility is reducing and markets are bracing themselves and waiting for a clear signal to re-avoid risk.
Once the pipes stop rattling, leverage starts to come in again, and cryptocurrencies tend to notice before the macro crowd has a name for them.
When the four-year cycle fades, liquidity becomes a cycle.
Many people still fixate on Bitcoin’s halving calendar. It is important to halve. It changes issuance, shapes long-term supply dynamics, and remains part of the story.
What is changing are the marginal factors, the factors that push prices up from week to week and month to month.
Spot ETFs have brought Bitcoin into a world where flows can rule. You can see that by looking at the market reaction in 2025. While capital inflows fueled the rally, capital outflows and risk-off positioning contributed to deepening drawdowns.
igcurrencynews has already documented how brutal that reset was in the ETF complex. According to igcurrencynews’s ETF AUM breakdown, the total AUM of US spot Bitcoin ETFs peaked at $169.5 billion on October 6th and declined to $120.7 billion by December 4th.
When assets under management take such a big hit, markets take time to regain confidence. The first requirement for that restructuring is a cleaner liquidity background.
This is where the “cycle may be over” framing comes in handy. Framing allows you to talk about what’s actually driving your next move and opens the door to looking at the macro plumbing without apologizing for it.
Grayscale takes that idea directly. In its 2026 outlook, the company claims that 2026 could mark the end of the apparent four-year cycle, and that Bitcoin could surpass all-time highs in the first half of this year.
Standard Chartered makes a similar structural point from a different angle. Their principal investigator argued that ETF flows have become a more important price driver than the classic halving rhythm.
You do not have to agree to every price target in these notes to use the frame. Market structures have changed and liquidity signals have become more important.
What to watch for in early 2026: indicators that liquidity is actually improving
If you want a clean checklist that will help you with more than just today’s headlines, this is the place.
- Will SRF usage normalize after the calendar changes?
The sharp decline would support the idea that December is primarily seasonal. Continued heavy printing would signal further reserve tightening and continue to put pressure on the Fed to continue adding liquidity. - Will Treasury Bill purchases continue at a constant level in the first quarter?
The New York Fed has already laid out the logic of the schedule in its RMP statement. When those “few months” turn into longer-term programs, the urge for liquidity intensifies. - Will broader financial conditions continue to ease?
The Chicago Fed’s National Financial Conditions Index can be tracked via FRED. Loose terms along with reserve support are the kind of setup that risk assets typically prefer. - Will native crypto liquidity increase again?
Stablecoins are the simplest proxy for transaction liquidity within a cryptocurrency. This is where DefiLlama’s stablecoin dashboard comes in handy. When total market capitalization begins to rise sustainably, it often coincides with an improvement in risk appetite. - Will ETF flows turn from background noise to steady bidding?
Farside’s ETF flow chart is a daily tape. One green day doesn’t change a regime, a steady streak does. - Does volatility continue to compress?
A more moderate volume regime means that leverage will be cheaper and financial institutions will be more comfortable adding exposure.
What a return to liquidity means for Bitcoin price: A realistic path, not a fantasy candle
The market likes clean stories. Liquidity increases, Bitcoin rises, and everyone cheers.
Reality moves more slowly.
Improving liquidity typically first manifests itself as narrower declines, improved order book support, and upside that preserves profits rather than giving it all back overnight. Flow then returns, spot buying becomes more stable, and larger moves are possible.
A reasonable base scenario for early 2026 would be: With funding stress easing after the year-end, the Fed continuing to increase reserve management purchases, and conditions remaining lenient, we believe crypto confidence will recover slowly.
In that world, Bitcoin doesn’t need a new story every week. We need a market structure that makes it easier for new capital to enter and makes it harder for small sellers to drive down prices.
A more bullish version overlaps two things: strengthening ETF inflows and a visible recovery in stablecoin supply growth. This combination turns liquidity support into demand, and demand moves prices.
In a more dangerous version, the pipes keep rattling. If funding stress persists or conditions become tough due to new macro shocks, liquidity could quickly evaporate and Bitcoin’s beta could come rushing back.
That’s why the surge in repos is so important. It was also a warning light that forced me to intervene with the system.
QT outflows had already stopped as banks had reached the Fed’s backstop and the Fed had already started building reserves through paper purchases.
Those are trivial matters if you live entirely within cryptocurrencies.
These are big details if you think Bitcoin is becoming a macro asset with a new kind of cycle: a liquidity cycle.
Early 2026 could be the first full test of the idea.
If the pipes remain calm, reserve support continues, and flows return, Bitcoin doesn’t need a halving story to do what’s best. All you need is oxygen.
(Tag translation) Bitcoin
