Bitcoin Slips Below $109K as Liquidity Tightens
Bitcoin (BTC) fell about 2% to $108,800, giving up most of its bounce from last Friday’s leverage-driven sell-off. Other major cryptocurrencies also declined, with Ether (ETH) at $3,824, XRP at $2.30, and Solana (SOL) at $183.95, each down roughly 3% over the past hour.
Meanwhile, precious metals continued to rally. Gold gained 2% to just under $4,300 per ounce, and silver climbed 3.6%, both reaching new record highs.
Tightening Liquidity Pressures Crypto Markets
The pullback in crypto appears linked to 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 using U.S. Treasuries as collateral, while EFFR indicates the rate banks charge each other for unsecured overnight lending. When SOFR exceeds EFFR, it signals scarce liquidity and rising short-term borrowing costs, putting pressure on risk assets like bitcoin.
Signs of Funding Stress
Additional stress signals include banks drawing $6.75 billion from the standing repo facility (SRF) on Wednesday—the largest amount since the pandemic (excluding quarter-end periods). The SRF, launched in 2021, offers overnight liquidity against U.S. Treasuries to help banks manage funding shortfalls.
Although the SOFR-EFFR spread remains far below the 2.95 peak during the 2019 repo crisis, tighter funding conditions and elevated repo draws highlight short-term market pressure. Traders are watching for potential central bank interventions that could reignite a BTC rally, though timing and impact remain uncertain.
