Bitcoin recovery expected as liquidity conditions change, but US macro remains a threat

Bitcoin's recent downturn is attributed to broader economic stresses, yet improved liquidity and a favorable outlook for 2026 could lead to a potential recovery. With the upcoming US Federal Reserve decision on interest rates looming, market sentiment is divided between a possible rate cut and maintaining the current rates. The Fed's cautious stance on monetary policy, especially with persistent inflation and a cooling job market, continues to weigh on Bitcoin's performance. However, a shift in fiscal policy, including reduced tariffs and targeted stimulus, may help uplift crypto demand. Historically, Bitcoin’s performance inversely correlates with the US dollar, which has strengthened recently. Despite current pressures, analysts anticipate that as economic uncertainties dissipate and liquidity returns, Bitcoin's potential for significant gains could be realized, especially as the Fed seeks to manage its balance sheet while easing conditions for an economic rebound.

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