BTC Falls Below $109K Amid Liquidity Squeeze in Crypto Markets

Bitcoin Dips Below $109K as Liquidity Tightens

Bitcoin (BTC) slid about 2% over the past hour to roughly $108,800, losing most of its rebound from last Friday’s leverage-driven sell-off. Other major cryptocurrencies are also down sharply: Ether (ETH) at $3,824, XRP at $2.30, and Solana (SOL) at $183.95, all showing roughly 3% declines in the last hour.

In contrast, precious metals continue to soar. Gold gained 2%, reaching just under $4,300 per ounce, while silver jumped 3.6%, both marking new record highs.

Tightening Liquidity Pressures Crypto

The main factor behind the crypto pullback is tightening liquidity in the broader 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 a single week—the highest level since December 2024.

SOFR reflects the cost of overnight borrowing backed by U.S. Treasuries, while EFFR indicates the rate at which banks lend excess reserves to each other. When SOFR exceeds EFFR, it signals that short-term liquidity is scarce, making riskier assets like bitcoin less appealing.

Funding Stress Signals

Other signs of stress are evident. On Wednesday, banks drew $6.75 billion from the standing repo facility (SRF), the largest amount since the COVID-19 pandemic (excluding quarter-end periods). The SRF, launched in 2021, provides overnight liquidity against U.S. Treasuries to ease funding shortages.

While the SOFR-EFFR spread remains far below the 2.95 peak during the 2019 repo crisis, the combination of rising borrowing costs and high repo draws highlights short-term financial stress. Crypto traders are watching closely, hoping central banks may intervene to reignite a bullish move in BTC, though the timing and impact remain uncertain.