Crypto Enters a “Self-Funded Phase” As Liquidity Cools: Is A Recovery Next?

Liquidity drives crypto cycles, and now, the money has stopped flowing in

Stablecoins, ETFs, and DATs have grown from $180B to $560B since early 2024, but momentum has slowed

Capital is rotating internally, not entering fresh → rallies die fast and breadth keeps narrowing pic

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Investors Keep Rotating Capital

Investors are shifting funds between major coins and altcoins, but not adding fresh money. This is why rallies have been short this cycle and the breadth has narrowed.

However, analysts note that if one of the main liquidity sources picks up again, then money could flow back into crypto.

“Until then, crypto remains in a self-funded phase, where capital is circulating, not compounding,” the analysts say. 

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Bitcoin Waits For Fresh Momentum

Cryptoquant analysts note that Bitcoin’s Bull Score hit 0 for the first time since January 2020. All 10 on-chain indicators, including MVRV, ETF flows, stablecoin liquidity, etc are below trend. Historically, this has marked either macro bottoms or late-cycle distribution before trend reversal. This shows that we may be in a late-bull to early-bear phase rather than a deep capitulation.

For Bitcoin to pick up, the ETF inflows, liquidity growth, and long-term holder accumulation need to return, otherwise it could enter an extended consolidation phase. While liquidity flows in crypto have slowed, some analysts are still bullish. 

Analyst Michaël van de Poppe notes that the market is not in a bear phase but is experiencing a normal correction within a longer-term Bitcoin bull cycle. 

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FAQs

Why is crypto liquidity slowing down right now?

Stablecoin, ETF, and DAT inflows have weakened, leaving the market in a “self-funded phase” where capital circulates but doesn’t expand.

What are the main channels that bring new capital into crypto?

Fresh money enters through issued stablecoins, ETF inflows, and digital asset treasuries, each reflecting different investor groups.

What needs to happen for Bitcoin to gain momentum again?

ETF inflows, rising liquidity, and renewed long-term holder accumulation must return for Bitcoin to break out of consolidation.