Key Takeaways
- •Bitcoin’s decline mirrors tightening global liquidity and reduced bank reserves.
- •Citibank analysts say BTC weakness could foreshadow pain for the Nasdaq.
- •A late-year recovery remains possible if liquidity improves.
October and November — historically bullish periods for digital assets — have delivered sharp losses, record liquidations, and growing concern about the link between crypto and traditional finance.
The market meltdown began after U.S. President Donald Trump reignited trade tensions with China, announcing fresh tariffs that sent risk assets tumbling. By mid-October, Bitcoin’s selloff triggered the largest liquidation event in the history of crypto markets, wiping billions in leveraged positions.
Now, as November unfolds, the damage is spreading beyond crypto — and Citibank analysts believe they know why.
The Real Culprit: Vanishing Liquidity
In their latest analysis, Citi points to a deepening liquidity drought across U.S. financial markets. The bank says recent measures by the U.S. Treasury Department — designed to pull liquidity out of the system — have reduced the cash available for speculative assets like Bitcoin.
At the same time, declining bank reserves have added another layer of strain. With less excess capital in the system, investors are pulling back from high-volatility sectors, leading to a synchronized cooling in both crypto and equities.
According to Citi, Bitcoin’s current weakness is not an isolated correction but part of a broader liquidity cycle that could soon test the resilience of the Nasdaq 100, long buoyed by the AI stock boom.
Bitcoin’s Correlation Breakdown
For much of the year, Bitcoin and the Nasdaq have traded in step. Both surged as liquidity expanded and enthusiasm for risk assets climbed. But as BTC fell below its 55-day moving average, that correlation began to break.
Citi’s analysts argue that Bitcoin — often a “liquidity barometer” for risk sentiment — is flashing an early warning. If crypto remains under pressure, the tech-heavy Nasdaq could be next in line for a pullback.
The Path Ahead: Hoping for a Holiday Rebound
Despite the gloom, the bank sees a potential bright spot on the horizon. If liquidity conditions improve toward the end of the year, both Bitcoin and U.S. equities could stage a synchronized rebound — the kind of Christmas rally that has historically marked the start of new risk-on cycles.
Until then, traders appear trapped between cautious optimism and fading momentum. Bitcoin’s price remains below key technical levels, and macro liquidity — the fuel that powered last year’s rally — is running thin.
Citi’s message is clear: this isn’t just another crypto correction; it’s a stress test for global risk appetite.