A significant contraction in global liquidity is approaching that could weigh heavily on Bitcoin prices in the coming months, according to Russell Thompson, chief investment officer at crypto asset manager Hilbert Group. The warning comes as Bitcoin trades around $76,400, well below its October 2025 peak of $126,000.
Thompson projects global liquidity could tighten by as much as 25%, creating substantial headwinds for risk assets including Bitcoin. This tightening follows a period of relative stability in financial markets after the implementation of the reserve maturity program, but the relief appears temporary.
Policy Intervention Expected
Despite the near-term challenges, Thompson expects U.S. policymakers to intervene with multiple tools to ease liquidity conditions. He anticipates reforms to the supplementary leverage ratio, which governs how much capital large banks must maintain against their total leverage exposure.
The Treasury General Account also represents a key mechanism for liquidity injection. When the Treasury draws down this account at the Federal Reserve, it effectively pumps money into the financial system. Thompson expects a substantial TGA drawdown without corresponding Federal Reserve bill issuance to offset the impact.
Interest rate cuts under potential new Federal Reserve leadership also feature in Thompson’s policy response scenario. These measures collectively could provide the liquidity support that risk assets need to sustain rallies.
Bitcoin’s Volatile Journey
Bitcoin’s price action over the past six months illustrates the dramatic shift in market conditions. After reaching an all-time high above $126,000 in October 2025, the cryptocurrency entered a sustained decline that persisted through year-end and into early 2026.
By February, Bitcoin had fallen to approximately $63,000, representing a roughly 50% decline from its peak. This correction occurred amid broader crypto market selling and tightening financial conditions, with exchange-traded fund outflows and reduced institutional demand characterizing the period.
The selloff marked a complete reversal from the euphoria that had driven markets higher in late 2025. Bitcoin underperformed equities during several stretches, reflecting its sensitivity to macro conditions and risk sentiment.
Regulatory Clarity as a Catalyst
Thompson sees potential support from advances in crypto regulation, expecting legal clarity on key measures before the summer congressional recess. This regulatory progress could help stabilize market conditions and improve investor confidence.
He also anticipates a faster expansion of the Federal Reserve’s balance sheet as disinflationary pressures build. Higher oil prices could weigh on economic growth, while softening labor markets and emerging stress in private credit markets may contribute to the disinflationary environment.
The combination of these factors could prompt more accommodative monetary policy sooner than currently expected by markets.
Treasury’s Liquidity Tools
Markets have focused heavily on the Federal Reserve as the primary source of liquidity, but Thompson emphasizes the Treasury’s significant capacity to inject funds into both the real economy and financial markets. With experienced Treasury leadership familiar with deploying these tools, he expects a more proactive approach to supporting market conditions.
The Treasury’s ability to influence liquidity through its cash management operations provides an additional channel for policy support beyond traditional Federal Reserve actions. Recent Treasury communications suggest awareness of these dynamics and willingness to use available tools when conditions warrant intervention.
Medium-Term Optimism Intact
Despite the near-term headwinds, Thompson maintains a constructive medium-term outlook for Bitcoin. He expects the cryptocurrency to trade “significantly higher” by year-end as liquidity dynamics improve and policy support takes effect.
Even in a more protracted scenario where current pressures persist longer than expected, Thompson sees liquidity conditions bottoming around 2027. This timeline could coincide with Bitcoin establishing fresh all-time highs, building on the foundation created during the current consolidation phase.
The analysis reflects broader themes affecting crypto markets, where traditional financial conditions increasingly drive price action. Federal Reserve policy decisions and Treasury operations have become critical factors for crypto investors to monitor alongside sector-specific developments.
Thompson’s framework suggests that while Bitcoin faces immediate challenges from tightening liquidity, the policy response toolkit remains robust. The key question becomes timing and magnitude of intervention rather than whether support will materialize.
Current Bitcoin prices around $76,400 reflect this transitional period, with the cryptocurrency having stabilized above its February lows but remaining well below previous peaks. The coming months will test whether policy support can arrive quickly enough to prevent further deterioration in crypto market conditions.
