Bitcoin's Path to $70K Amid Fed Liquidity Risks

Bitcoin's price trajectory in late 2025 has been a rollercoaster, oscillating between euphoria and despair. After hitting an all-time high of $126,000 in October 2025, the cryptocurrency entered a bearish phase, with technical indicators and macroeconomic headwinds painting a grim picture for 2026. This article dissects the interplay between Federal Reserve liquidity policies, stablecoin-driven banking risks, and Bitcoin's technical breakdowns to argue that the path to $70,000 is not just plausible-it's increasingly probable.

Macrotrends: The Fed's Liquidity Tightrope

The Federal Reserve's 2025 policy decisions have been a double-edged sword for Bitcoin. While the central bank officially ended quantitative tightening (QT) on December 1, 2025, stabilizing its balance sheet at $6.6 trillion, the broader liquidity environment remains fragile. QT, which drained liquidity by allowing maturing securities to expire without reinvestment, had previously exacerbated downward pressure on risk assets like Bitcoin. Its cessation should, in theory, ease this pressure. However, the Fed's focus on stablecoins has introduced new risks.

Stablecoins-particularly those backed by U.S. Treasurys and bank deposits under the GENIUS Act- have displaced traditional deposits in the banking system, creating concentrated, uninsured liquidity risks. This shift has forced banks to rely on higher-cost funding, reducing their lending capacity and indirectly tightening credit availability for crypto-related ventures. The Fed's regulatory push for stablecoin transparency, while stabilizing the broader financial system, has also reduced the "shadow banking" dynamics that once fueled speculative crypto demand.

Moreover, the Fed's accommodative stance on crypto banking-such as clearer AML guidelines and prudential frameworks-has not offset the structural liquidity constraints. While institutional participation in crypto has grown, the lack of new quantitative easing means the Fed is not actively injecting liquidity into the system. This creates a paradox: Bitcoin's institutional adoption is rising, but the macroeconomic tailwinds are absent.

Technical Breakdown: A Bearish Perfect Storm

Bitcoin's technical indicators in late 2025 have been a red flag for bulls. After peaking at $126,000, the price fell below critical support levels, forming a bearish wedge pattern-a classic precursor to a resumption of a downtrend. This pattern was confirmed by divergences in the RSI and MACD, which showed weakening momentum despite occasional rallies.

The breakdown of long-term momentum was further signaled by Bitcoin's drop below its 200-day moving average, a key trend benchmark. This was compounded by a "death cross" in moving averages, where the 50-day SMA crossed below the 200-day SMA-a historically bearish event. The price action in late 2025 saw Bitcoin range between $85,000 and $100,000, reflecting a market in consolidation but with a clear bias toward further declines.

Retail and institutional demand also weakened. The Fear & Greed Index hit "extreme fear" levels, and on-chain metrics like the MVRV ratio suggested a high probability of capitulation. While some analysts projected a rebound to $111,000 based on strong institutional flows, the technical case for a continuation of the bearish trend was stronger.

The bearish case for Bitcoin hinges on the convergence of macroeconomic and technical factors. The Fed's liquidity policies, while ending QT, have not reversed the broader tightening cycle. Meanwhile, stablecoin-driven banking risks and the absence of new QE mean that Bitcoin's liquidity environment remains constrained. Technically, the breakdown of key support levels and momentum indicators suggest a continuation of the downtrend.

If Bitcoin follows its current trajectory, the next major target could be $70,000-a level that would test the psychological and technical floor of the 2024–2025 rally. This scenario assumes that the Fed does not reintroduce QE, stablecoin regulations remain restrictive, and institutional demand fails to offset the bearish momentum. While some optimists point to the potential for a rebound in 2026, the near-term outlook remains bearish.

Conclusion

Bitcoin's journey in 2025 has been a masterclass in the interplay between macroeconomic policy and technical analysis. The Fed's liquidity policies, stablecoin-driven banking risks, and bearish technical signals all point to a challenging path ahead. For investors, the lesson is clear: in a world where liquidity is a scarce resource, Bitcoin's price is as much a function of macroeconomic forces as it is of market sentiment. And right now, the forces are aligned against the bulls.