MarketsBitcoinAltcoinsEthereum
|9 min ReadSmart Money Is Front-Running Bitcoin’s 2026 Liquidity Comeback
Tariq Al-Saidi
Senior Analyst
Published
Jan 16, 2026
Crypto Twitter looks exhausted. Charts look heavy. Headlines scream about MicroStrategy stress, Japanese yields, China re-banning crypto and election risk. Yet behind that noise, the people who actually move size are leaning the other way.
In a recent macro podcast, analyst Miles Deutscher and strategist Fabian argued that the brutal washout of the past weeks has more of a late-stage reset profile than the start of a real bear. Spot buyers around 80,000 have been persistent, on-chain realized losses are peaking, and sovereign and institutional flows are treating every deep dip as inventory, not exit liquidity.
The catch is timing. The base can take months to build, and the trigger is not a halving meme. It is the same thing that has always driven Bitcoin once it became a macro asset: liquidity.
Capitulation Looks Late, Not Early
On-chain and price action tell a cleaner story than the headlines. Recent selloffs pushed spot down into the high 80,000s and briefly into the 80,000 handle again, but every wave of fear around MicroStrategy, Japanese bonds or “China bans Bitcoin” lookalike stories has been bought back faster.
Realized loss metrics and derivatives flushes resemble prior capitulation clusters rather than mid-trend corrections. Short-term holders have already puked a large chunk of inventory at a loss. Miners are under visible pressure, with hash rate adjustments signaling that marginal operators are shutting rigs instead of adding more.
Fabian’s framing is simple: the panic phase is mostly done, but the base can be messy. The 80,000 zone can be revisited, even briefly undercut, without breaking the bigger picture. What matters is the reaction, not whether intraday candles stab a few thousand lower.
The upside, however, is not a straight line either. On spot and futures order books, the 95,000 to 100,000 band is stacked with supply. Daily moving averages, weekly trend lines and visible volume nodes all cluster there. The first time price re-enters that pocket after a wipeout, it almost always meets heavy selling.
The tell will be what happens once that supply is hit. Do ETFs flip back to sustained net inflows. Do we see broad participation at higher prices instead of a thin squeeze. Are candles through resistance backed by real volume or just a short-covering spike. That response will say more about the next leg than any single “breakout” screenshot.
Liquidity Cycles, Not Four-Year Myths
Both guests land on the same core point. Bitcoin trades like a “liquidity sponge”. It absorbs excess reserves when global conditions ease and gets choked when they dry up. Everything else, from halvings to narratives, sits on top of that.
To track that regime, they keep coming back to the ISM manufacturing index and related macro gauges. In the last cycles, Bitcoin’s major tops lined up with ISM pushing above roughly 55, not with some magical four-year clock. Today ISM is far lower, and leading signals for a turn are building rather than fading.
Fabian splits the stack into three layers. Liquidity cycles move first, then growth and business cycles, then slower indicators like ISM. If, as many macro desks expect, global liquidity expands through 2026, ISM recovery and risk-asset strength follow with a lag. In that framing, Bitcoin is much closer to the left side of the upswing than the right.
That feeds directly into the Fed path. Markets have already priced the first cut as almost guaranteed, with futures implying policy gliding toward roughly 3 percent by late 2026. Fabian thinks that is too conservative. Between mid-cycle softness in the labor data, political pressure into the US midterms and a likely leadership change at the Fed board next May, he expects more cuts than the current strip implies.
The near-term risk is a “hawkish cut” communication that tries to cap optimism. Powell can easily pair the first move with tough language about staying data-dependent and not pre-committing to a full easing cycle. Equities could wobble on that tone. For Bitcoin, the bigger driver is not one meeting but the cumulative effect of turning quantitative tightening into a reserve-rebuilding regime.
Inflation dynamics quietly support that path. Real-time gauges such as True Inflation are already rolling over from local highs. Headline year-on-year prints still look sticky, but under the hood, disinflation pressure is re-appearing. That makes it easier politically to move toward easier policy if growth keeps wobbling.
The net result is a setup where markets could spend the next few quarters repeatedly repricing toward more easing, not less. For a liquidity-sensitive asset like Bitcoin, that repricing is the real story.
Banks, Sovereign Funds And The Slow Normalisation Of Bitcoin
While crypto natives argue about whether “this cycle is over”, TradFi is quietly treating the asset as infrastructure. Bank of America has reportedly started telling clients that a low single-digit portfolio allocation to Bitcoin and digital assets is now reasonable. Vanguard flipped from a strict “no ETF” stance to offering spot Bitcoin exposure to tens of millions of accounts once leadership changed.
Even the old guard is building around the new pipes. JPMorgan is structuring products for institutional clients using IBIT and similar ETFs as the underlying. Those notes do not require every pension or insurance desk to touch Bitcoin directly. They still route flows into the same underlying liquidity pool.
At the state level, the discussion is even more sensitive. BlackRock chief Larry Fink has hinted that several sovereign wealth funds are quietly accumulating BTC in wide bands, scaling in as price trades near 120,000, 100,000 and then much more aggressively around 80,000. None of these entities have any incentive to advertise that behavior until they are done.
That stealth accumulation changes the market’s plumbing. Every time sovereign or treasury desks absorb spot around major panic zones, the next drawdown tends to be shallower, and realized volatility grinds lower. Bitcoin starts to look less like a pure speculative chip and more like a long-term diversifier alongside gold, equities and government bonds, especially for countries that are already overexposed to US assets.
On top of that, Bitcoin-backed financing is creeping toward the mainstream. ETF holdings and corporate treasuries provide collateral that can back structured notes, loans and eventually even mortgages. MicroStrategy is exploring borrowing secured by its BTC stack, partly to avoid being treated as a passive fund in index classifications and partly to keep optionality on new leverage.
ETH, DAT Flows And Prediction Markets As Side Bets
The picture is not only about Bitcoin. One of the most interesting flows in this cycle sits in DAT-style public vehicles that hold crypto on their balance sheets. While the hype around Bitcoin DATs has cooled, Ethereum-focused players such as Bitmine have been buying aggressively, sometimes outpacing MicroStrategy’s coin accumulation in notional terms.
That buying concentrates a meaningful share of ETH supply, around the mid-single-digit percent range, in corporate treasuries. In the short run it acts like a giant buyback machine, helping ETH outperform BTC whenever macro conditions are risk-on and those treasuries keep adding. Over longer horizons it introduces a different risk: if those entities ever need to unwind, the overhang can hurt.
Bitcoin, for its part, faces its own structural drags. Miners grappling with tighter margins and the pull of AI data-center conversions, early whales with huge legacy stacks and potential event overhangs such as large legal recoveries all sit in the background. None of these flows negate the liquidity cycle, but they can modulate relative performance.
On the speculative edge, prediction markets are quietly turning into a serious tool rather than a toy. Platforms that let traders bet on “yes/no” outcomes for token launches, elections and macro events have become a way to express views without liquidation risk. Structurally, they behave like simplified options markets. You can bet, for example, that a hyped pre-TGE token will trade below a given fully diluted value 24 hours after listing, without the pain of managing margin or funding rates.
For airdrop farmers and fund desks, that simplicity doubles as a hedge. If you know you will receive a large distribution in a volatile launch, you can sell outcome tokens in the prediction market to offset some of the downside. The same logic extends to political and macro tail risks that could smash Bitcoin in very specific scenarios.
Prediction markets will not decide where BTC trades in 2026. They will, however, give sharper tools to the cohort that already understands this asset is glued to liquidity, not folklore. If the Fed ends up cutting more than the curve is pricing and sovereign and institutional buyers keep scaling in, the “boring” range that has CT furious today may be exactly where the next wave of smart money was happiest to spend the year.
Disclaimer: This document is intended for informational and entertainment purposes only. The views expressed in this document are not, and should not be taken as, investment advice or recommendations. Recipients should do their own due diligence, taking into account their specific financial circumstances, investment objectives and risk tolerance, which are not considered here, before investing. This document is not an offer, or the solicitation of an offer, to buy or sell any of the assets mentioned.