Bitcoin Falls Below $109K as Tightening Liquidity Pressures Crypto
Bitcoin (BTC) slid roughly 2% over the past hour to $108,800, erasing most of its rebound from last Friday’s leverage-driven sell-off. Other major cryptocurrencies also faced declines, with Ether (ETH) at $3,824, XRP at $2.30, and Solana (SOL) at $183.95, all down about 3%.
Meanwhile, precious metals continued their upward momentum. Gold rose 2%, just shy of $4,300 per ounce, while silver climbed 3.6%, hitting new record highs.
Liquidity Crunch Hits Crypto
The key factor behind the crypto pullback appears to be tightening liquidity in the financial system. The spread between the secured overnight financing rate (SOFR) and the effective federal funds rate (EFFR) widened to 0.19 from 0.02 in one week—the highest since December 2024.
SOFR measures the cost of overnight borrowing using U.S. Treasury securities as collateral, while EFFR reflects unsecured interbank lending rates. When SOFR exceeds EFFR, it signals scarce liquidity, which tends to weigh on risk assets like bitcoin.
Signs of Funding Stress
Additional stress signals include banks drawing $6.75 billion from the standing repo facility (SRF) on Wednesday, the largest amount since the end of the pandemic (excluding quarter-end periods). The SRF, introduced in 2021, provides overnight cash loans against Treasuries to ease potential funding shortages.
Although the SOFR-EFFR spread is far below the 2.95 peak seen during the 2019 repo crisis, the combination of tighter borrowing costs and elevated repo draws underscores short-term market stress. Crypto traders are watching closely, hoping for central bank intervention to reignite a BTC rally, though timing and impact remain uncertain.
