Bitcoin's $87K Rally: Liquidity Constraints and the Fragile Momentum in a Volatile Market

Bitcoin's recent surge past $87,000 in November 2025 has sparked renewed debate about the cryptocurrency's trajectory, but beneath the surface, the market remains a minefield of liquidity constraints and fragile momentum. While the price rebounded from a seven-month low of $86.3k, the broader crypto ecosystem continues to grapple with systemic risks that could derail further recovery. This analysis unpacks the interplay of liquidity pressures, order book fragility, and macroeconomic headwinds shaping Bitcoin's $87K rally-and why investors should tread cautiously.

Liquidity Constraints: A Market on the Brink

Bitcoin's November 2025 crash-from $126,000 to as low as $80,000-exposed the fragility of crypto liquidity. The sell-off triggered $2 billion in liquidations over 24 hours, with over 227,500 traders wiped out as leveraged long positions collapsed. This was exacerbated by thin order book depth, a legacy of prior October liquidations that had already strained market makers. At the $87K level, the market's ability to absorb large trades without slippage remains compromised, as evidenced by the sharp drop to $86.3k before a partial rebound to $87.3k.

Institutional outflows have compounded the problem. U.S. spot Bitcoin ETFs recorded $903 million in net outflows on November 20 alone, signaling a shift of capital from crypto to equities amid global rate uncertainty according to research. Meanwhile, Bitcoin's market dominance fell to 58.8% in November from over 61% in October, reflecting a gradual migration of capital to altcoins with structured roadmaps, such as Bitcoin Munari. While such projects may offer long-term value, they also highlight the crypto market's struggle to retain liquidity during downturns.

Fragile Momentum: Technical and Sentiment Indicators

Bitcoin's technical picture remains bearish. Since its October 2025 all-time high of $126k, the asset has been in a correction phase, retesting the lower boundary of a symmetrical rising channel formed since early 2023. Open Interest in Bitcoin Perpetual Futures has plummeted from $94 billion to $68 billion, while funding rates remain flat, indicating a lack of conviction among traders. These metrics suggest that the recent $87K rally is more a function of short-covering than sustained demand.

Retail sentiment, as measured by the CoinMarketCap Fear and Greed Index, hit a yearly low of 15/100 in November 2025-a level historically associated with market bottoms according to analysis. While this could foreshadow a rebound, Santiment data reveals a dissonance between retail pessimism and actual market behavior. Historically, extreme fear has often preceded reversals, but such patterns are not guaranteed in a market increasingly dominated by institutional players.

Macro Risks: AI Trade Exhaustion and Fed Policy

Beyond liquidity and technical factors, Bitcoin's volatility is tied to broader macroeconomic forces. Analysts point to the potential exhaustion of the AI trade, which had driven speculative capital into crypto earlier in 2025. As AI hype wanes, investors are reallocating to equities, further pressuring crypto markets. Compounding this, uncertainty around Federal Reserve rate cuts-initially expected in December-has created a volatile backdrop. A delayed or smaller-than-anticipated rate cut could prolong Bitcoin's slump, while a dovish pivot might catalyze a rebound.

The Path Forward: Rebound or Reckoning?

Despite the risks, some analysts remain cautiously optimistic. Bitcoin's retest of the $87K support level-part of a multi-year channel-could serve as a foundation for a recovery, particularly if the Fed delivers on rate cuts. Historical parallels, such as the 2019 market rebound following a government shutdown, suggest that extreme fear may yet give way to buying opportunities. However, this hinges on resolving liquidity constraints and stabilizing institutional outflows.

For now, the market remains in a fragile equilibrium. Bitcoin's $87K rally is a temporary reprieve, not a sign of sustained momentum. Investors must weigh the risks of further downside-potentially to $82k or $70k-against the possibility of a Fed-driven rebound. In this environment, liquidity management and macroeconomic positioning will be critical.