Bitcoin fell to $113,000, 8.5% lower from its record high of $124,000. The decline is not being caused by issues in the world of cryptocurrencies, but by an even larger player in the world of finance — a $400 billion liquidity draw by the U.S. Treasury.
The Treasury’s efforts to replenish its General Account (TGA) through issuing debt are draining money from the markets. Stocks are holding up on strong earnings, but Bitcoin and the rest of the cryptos are bearing the bulk of it.
Bitcoin slips to $113K, down 8.5% from its peak, as a $400B U.S. Treasury liquidity drain rattles markets beyond crypto ( Image Source: Coinspeaker )
Macro Liquidity Pressures Weigh on Crypto
Liquidity is what powers financial markets, and it is being drained out at scale right now. U.S. Treasury activities to fund are absorbing hundreds of billions, drawing fewer dollars from the system.
Equities remain relatively supportive, having been softened by strength in corporate earnings. Crypto isn’t so softened, though. That leaves us with higher volatility, with Bitcoin being more sensitive to shifting liquidity than other assets.
That has again reopened the debate of whether Bitcoin is behaving as a hedge in the vein of gold, or whether it’s still a high-risk asset that goes up and down with global liquidity flows.
Retail Traders Break Under Pressure
Similar to on trading websites and social media platforms, the retail sentiment has become extremely bearish. The majority of individual investors feel that the correction is signaling the start of a long-term bear market.
But history rebuts. Analysts often say that crowd theatre pessimism can signal a short-term bottom, which then leads to a reversal. Markets will correct crowd psychology, and rallies will follow when most fear is there.
Meanwhile, the overall mood is one of worry. Panic selling by smaller market participants is accelerating the pace of Bitcoin’s decline, creating steep whipsaws in daily action.
Yep.
False breakout + bearish divergence and extreme froth in sentiment = pic.twitter.com/cLwf6KN10R
— Rock Bottom Entries (@RockBtmEntries) August 18, 2025
Institutions Hold Their Ground
While retail investors are losing their heads, institutional players are holding their ground. Global asset manager VanEck is sticking by its year-end Bitcoin price prediction of $180,000, which suggests that the large players regard this pullback as a short-term shakeout rather than the start of the end.
Their conviction is supported by sustained flows into spot Bitcoin ETFs and sustained corporate buying. MicroStrategy, for example, now has more than 3.67 million BTC, which supports the story of Bitcoin as a long-term strategic wager for institutions.
This contrast between short-term retail fear and long-term institutional conviction is powering today’s market forces.
What’s Behind the Fall?
Essentially, the downfall of Bitcoin is a result of the $400 billion drawdown in liquidity out of the U.S. Treasury. The occurrence does serve to point out that crypto prices are extremely well correlated with general financial trends.
So far from being cut off from the remainder of the world of traditional finance, the fortunes of Bitcoin are still inextricably bound up with global trends in liquidity. When governments and central banks reallocate their cash reserves, crypto feels the shock waves — sometimes more than equities or bonds.
It’s not entirely bad, though. Liquidity cycles are, by definition, cycles. When the Treasury eventually turns the corner, the liquidity tide can shift, and Bitcoin will benefit from it.
All roads lead to Bitcoin. Few outside of bitcoin circles understand this.
Here’s what I mean #BTC is selling off because Wall St and Main St both treat #Bitcoin as a “risk-on” asset.
If you’re none the wiser, this makes sense. Other risk assets, like tech stocks and small… pic.twitter.com/e3mzFqwohU
— Rip VanWinkle ⚡️ (@danieleripoll) April 17, 2024
Why This Matters
The latest Bitcoin dip is more than just another price move. It has larger implications for what the asset is imagined to be in today’s financial landscape.
- Macro linkages: Bitcoin is playing more of a liquid vehicle and less as an independent asset, reacting to Treasury action.
- Investor divide: The divergence between shell-shocked retail hands and serene institutional hands reflects growing style differences between various participants.
- Narrative test: Correction puts the question back — is Bitcoin digital gold, or still largely a leveraged risk asset?
Also Read: Pro-crypto policies boost crypto rally
While Bitcoin stays at $113,000, markets are hanging in the balance. Whether prices will fail to steady up or not hinges on whether pressure on liquidity eases or not. Or if ETF flows behave as usual, and sentiment shifts, Bitcoin can bounce back faster than one thinks.
It’s not a crypto fable: something is certain. It is an examination of how global finance, sovereign debt policy, and investor sentiment all intersect in the moment.
For seasoned investors, this is another iteration. For new buyers, a reminder that Bitcoin can’t be divorced from the same forces that dominate the rest of the economy.
And if the second act is a bounce or an extension of the plunge, Bitcoin’s place in global markets becomes more evident: it is no longer a bit player, but a tell on liquidity in a highly interconnected financial world.
