Bitcoin’s struggle to break past $100K likely reflects liquidity constraints and the cooling of Nvidia’s rally.

Bitcoin (BTC) has once again remained within a narrow trading range of $90,000 to $100,000 for the third consecutive week, with only a brief attempt to surpass the $100,000 mark on December 5. This ongoing indecisiveness in the market is due to two key factors that are limiting Bitcoin’s potential for further price appreciation.

First, the influx of liquidity into the crypto market has significantly slowed down, especially from channels such as spot exchange-traded funds (ETFs). This reduction in liquidity growth has contributed to the cooling of bullish momentum, which had previously driven Bitcoin to its record highs. Data from 10x Research reveals that the market liquidity impulse index—tracking factors like stablecoin minting, Bitcoin ETF inflows, and futures market dynamics—has dropped to $7 billion from over $15 billion in early November. This sharp decline in liquidity is likely a major reason why Bitcoin has struggled to hold its position above the $100,000 level.

Markus Thielen, the founder of 10x Research, emphasized that the slowdown in liquidity is a key factor in Bitcoin’s inability to sustain its momentum. The liquidity index has been forming lower highs recently, which suggests a bearish divergence with Bitcoin’s price action.

The second factor at play is the recent deceleration in the stock performance of Nvidia (NVDA), a company that has become closely associated with the rise of artificial intelligence (AI) and risk assets. Since the launch of ChatGPT in late 2022, Nvidia’s stock has shown strong correlation with Bitcoin, with both assets seeing significant growth following their respective bottoms in late 2022. However, Nvidia’s rally has lost steam since mid-November, and analysts at TheMarketEar note that Bitcoin’s post-U.S. election surge to $100,000 closely mirrored Nvidia’s own performance. Despite Bitcoin rising 130% this year, Nvidia’s stock has outperformed, gaining 172% over the same period.

As Nvidia’s growth has slowed, it has begun to show signs of a bearish reversal, which could weigh on risk sentiment across the broader market. The stock’s one-year put-call skew has become neutral, signaling a shift away from the bullish sentiment seen earlier in the year.

With the excess bullish sentiment in the crypto market now more subdued, the current environment reflects healthier leverage levels. Although Bitcoin could still make another attempt at surpassing the $100,000 level, the success of such a breakout will depend on the return of liquidity inflows and the broader market sentiment, including the performance of major risk assets like Nvidia.