The price of Bitcoin (BTC USD) briefly fell below the $100,000 mark on November 5, marking the first time since June 23. This downturn was influenced by macroeconomic challenges and over $1 billion in liquidations that occurred on November 4.
The market experienced another wave of liquidations exceeding $1 billion on November 3. Traders may continue to face increased volatility as US dollar liquidity undergoes a structural tightening.
At press time, Bitcoin (BTC USD) was trading at $102,926.17, reflecting a 1.4% increase over the past 24 hours. This brief upward movement followed a correction on November 4, when Bitcoin closed down nearly 5% at $101,497.22.
Analyst Projections Point Towards a Potential $105,000 Test
On November 5, Crypto Stocks Freedom shared that Bitcoin was breaking back above the $102,000 level. The analyst expressed a continued bullish outlook, suggesting that the asset was more likely to test $105,000 before any potential drop below $100,000.
The analyst highlighted November 5 as a significant date due to the Supreme Court's decision on the legality of Trump's tariffs. Traders were advised to anticipate volatility and exercise caution regarding excessive risk.
The 15-minute chart indicated that the Bitcoin (BTC USD) price consolidated near $102,000 on November 5. The analyst's projection presented two potential scenarios: a continuation towards a channel between $104,000 and $105,000, indicated by a green line.
Conversely, a red line on the chart depicted a possible retracement back toward the $100,000 support zone in the event of rejection.
Ash Crypto also noted on November 5 that Bitcoin (BTC USD) was forming a hidden bullish divergence on the one-week timeframe.
This analyst expressed hope for the pattern to materialize, displaying a weekly chart where the Bitcoin price tested a support line around $101,000.
The Relative Strength Index (RSI) showed a series of higher lows, creating a divergence with the price action. A yellow trendline on the RSI suggested that momentum remained robust despite recent price fluctuations.
Liquidity Tightening Contributed to November Weakness in Bitcoin (BTC USD) Price
ET, a researcher at SoSoValue Community, posted an analysis on November 4 explaining the reasons behind Bitcoin's price decline.
The analysis indicated that US dollar liquidity was experiencing structural tightening. Key indicators included the Treasury General Account (TGA) balance approaching $1 trillion, which drains liquidity from the market.
Stress in the short-term funding market intensified, evidenced by the widening spread between the Secured Overnight Financing Rate (SOFR) and the Federal Funds Target Rate (FDTR) to +30 basis points.
The Federal Reserve was compelled to reintroduce temporary overnight repo operations, injecting approximately $30 billion in liquidity.
This marked the first such intervention since the 2019 repo crisis. The liquidity vacuum was primarily attributed to the US government shutdown.
Facing a budget impasse and the risk of a shutdown, the Treasury had pre-funded its operations by issuing substantial amounts of debt.
Cash was then held in the TGA account, directly reducing bank reserves. With fewer market dollars in circulation, risk assets came under pressure.
Bitcoin, being the asset most sensitive to liquidity, was affected first. ET suggested that the outlook was not entirely negative.
Historically, periods of extreme cash hoarding by the Treasury and liquidity tightening have often preceded market reversals.
Potential Government Reopening Could Spark a Bitcoin (BTC USD) Rebound
As of November 5, the government shutdown had reached a record duration, leading to accumulating fiscal, economic, and social pressures.
Programs like SNAP food assistance faced constraints, airport security and federal air traffic control experienced temporary suspensions, and both consumer and business confidence declined.
Signs of bipartisan compromise began to emerge, particularly as the recent stock market pullback intensified pressure to resolve the shutdown.
Market expectations suggested that the Senate might push for a compromise before the Thanksgiving recess on November 15.
Upon the government's reopening, Treasury spending would resume. This would likely lead to a decline in the TGA balance, a return of liquidity, and a potential rebound in risk appetite.
Consequently, the Bitcoin price might be approaching its final downward phase before a recovery. The convergence of renewed fiscal spending and the next Federal Reserve rate-cutting cycle is anticipated to initiate a new liquidity phase.
As a non-yield-bearing asset, the Bitcoin (BTC USD) price is highly susceptible to changes in liquidity conditions. Tightening US dollar liquidity has historically exerted downward pressure, which has been a primary factor behind the weakness observed since mid-October.
Fed Injections Provided Relief to Short-Term Stress
As of October 31, overnight reverse repurchase agreements (ON RPs) stood at $29.4 billion, a decrease from the peak of $49.75 billion recorded in September 2019.
These operations, which use Treasuries as collateral, provide primary dealers with overnight cash. The Fed's action indicated genuine funding stress in the short-term market.
While quantitative tightening was nearing completion, shrinking reserves placed strain on funding markets. The restart of repo operations signaled a shift from passive balance sheet reduction to active liquidity management.
Although the $29.4 billion operation was smaller than those in 2019, its symbolic importance was significant, indicating that liquidity gaps had exceeded the Fed's tolerance threshold.
The operation temporarily narrowed SOFR-repo spreads, alleviating funding pressure and creating a short-term quantitative easing (QE) effect if sustained.
ET predicted that the Bitcoin (BTC USD) price might be experiencing its final downward leg, with a liquidity rebound anticipated once fiscal spending restarts and the next rate-cut cycle commences.
Prediction markets and institutions like Goldman Sachs anticipate the government reopening by mid-November.
The TGA balance, currently near $1 trillion, is the primary driver of the existing liquidity stress. Once the government reopens and spending resumes, the TGA is expected to decrease, dollar liquidity should recover, and the Bitcoin price is likely to find support.