Crypto Market Liquidity Analysis Post-Fed: A Deep Dive

Wednesday Nov 5 2025 09:00

Duration

2 min

  1. 1. Overview of the Current Situation

  2. 2. Global Liquidity Flows

  3. 3. Leverage Cleansing

  4. 4. Market Reaction to Fed Decisions

  5. 5. Why is Crypto Underperforming?

  6. 6. Looking Ahead

Overview of the Current Situation

Despite a supportive macroeconomic environment, characterized by interest rate cuts, the end of quantitative tightening, and high equity market indices, the cryptocurrency market's performance has continued to lag. This divergence is largely attributed to waning liquidity flows following the Federal Open Market Committee (FOMC) meeting.

Global Liquidity Flows

While global liquidity is expanding, it is not translating into significant inflows into the crypto market. ETF inflows have stalled, Decentralized AI (DeAI) activity has dried up, while stablecoins maintain growth.

Leverage Cleansing

Leverage appears to have been cleansed from the market, suggesting a healthier market structure. However, a resurgence in ETF inflows or DeAI activity is crucial to restoring liquidity and potentially triggering a rally.

Market Reaction to Fed Decisions

The past week saw interest rate cuts by the Federal Reserve, FOMC meeting minutes, and earnings announcements from major US technology companies, leading to significant volatility. A 25-basis-point rate cut, the end of quantitative tightening, and acceptable earnings performance from the "Magnificent Seven" in the US stock market provided support. However, Powell's tempering of expectations for another imminent rate cut caused market jitters. The near-certain 95% pricing of a rate cut in the market before the meeting has now fallen to 68%, prompting traders to reassess strategies, leading to a swift shift towards risk aversion.

Why is Crypto Underperforming?

While global risk assets are rising, crypto is lagging due to liquidity issues. Although global liquidity is expanding, it's not flowing into the crypto market in the same way it used to. Stablecoin supplies continue to gradually climb, but Bitcoin ETF inflows have stalled since the summer.

Looking Ahead

Even though the market is still digesting the 1011 liquidation, the overall structure is sound. Leverage has been cleansed, volatility is under control, and the macroeconomic environment provides positive support. Bitcoin remains a market anchor thanks to stable ETF inflows and tightening supply on exchanges, while Ethereum and some L1 and L2 tokens are showing signs of relative strength. ETF inflows and DAT activity should be closely monitored as key indicators, as these are likely the first signals of liquidity returning to the crypto market.

Risk Warning: this article represents only the author’s views and is for reference only. It does not constitute investment advice or financial guidance, nor does it represent the stance of the Markets.com platform.When considering shares, indices, forex (foreign exchange) and commodities for trading and price predictions, remember that trading CFDs involves a significant degree of risk and could result in capital loss.Past performance is not indicative of any future results. This information is provided for informative purposes only and should not be construed to be investment advice. Trading cryptocurrency CFDs and spread bets is restricted for all UK retail clients. 

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Written by:

Liam James

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