BTC could dip further on short-term liquidity stress, but Sygnum CIO maintains bullish view

Sygnum Bank Chief Investment Officer Fabian Dori says a short-term liquidity squeeze is driving the recent crypto sell-off, with further downside possible, though improving fundamentals could accelerate a recovery.

Bitcoin (BTC $71,385.87) volatility is likely to remain elevated in the near term as markets contend with constrained liquidity and deeply fractured sentiment, Dori told CoinDesk. “We can see volatility remaining high in the short term, and prices could even go lower from here,” he said. “Sentiment has collapsed. Trust and confidence for investors to build exposure are very limited.”

The recent divergence between gold, which has held firm, and innovation assets such as Nasdaq tech stocks and bitcoin highlights the fragility of the current environment. Yet Dori cautions against searching for a single driver behind the market dislocation. “It’s a number of elements that have been building over recent months,” he said.

Crypto markets have trended lower in recent months, with bitcoin and other major tokens retreating from earlier highs amid macro headwinds and uneven institutional flows. Sticky inflation and shifting expectations for Federal Reserve rate cuts have curbed risk appetite, while periodic geopolitical flare-ups have reinforced a move away from speculative assets. Thin ETF flows, liquidity stresses, and leveraged liquidations have magnified downside moves, repeatedly testing key support levels.

“Crypto has been on thin ice for some time,” Dori said. Long-term holders are cautious of bitcoin’s four-year cycle and the risk of a correction phase, leaving the ecosystem more fragile with fewer strong hands to absorb volatility.

Compounding pressures are liquidity constraints and broader macro dynamics. Since June last year, increased U.S. Treasury issuance has raised balances in the Treasury General Account (TGA) at the Federal Reserve, effectively pulling liquidity from markets. “Crypto, being one of the most liquidity-sensitive asset classes, was among the most affected,” Dori noted.

A record liquidity event on Oct. 10 further reduced risk appetite, compressing funding rates and weakening market depth. Other factors, from bitcoin’s store-of-value narrative and quantum computing concerns to delayed U.S. legislation like the Clarity Act, have added to uncertainty.

Bitcoin has drawn down roughly 40–50% from its recent highs since early October, levels last seen during the 2022 systemic crisis. Dori rejects comparisons to 2022, emphasizing that regulatory clarity, institutional adoption, and counterparty soundness make today’s environment fundamentally different.

In his view, current weakness reflects a short-term liquidity squeeze rather than a structural shift in fundamentals. Signs of improvement are emerging beneath the surface: U.S. ISM services and manufacturing data have surprised positively, and headline inflation, while above the Fed’s 2% target, is subdued enough to allow potential rate cuts in coming months. Treasury-driven liquidity pressures could also ease, potentially accelerating a market turn ahead of the next Federal Open Market Committee meeting.

From a crypto perspective, fundamentals remain constructive. Stablecoin growth continues, integration into traditional finance is expanding, and token activity on networks such as Ethereum and Solana remains robust. Institutional adoption, while uneven, is ongoing. “Once sentiment normalizes and liquidity conditions improve, the gap between traditional assets and crypto should narrow again,” Dori said.

For now, sentiment dominates. Fear-and-greed indicators are at extreme fear levels, highlighting the limited appetite for exposure. A catalyst could come from comprehensive U.S. crypto legislation like the Clarity Act, a normalization of geopolitical tensions, or improvements in AI and sustainability narratives. A recovery in liquidity conditions alongside continued institutional inflows would further support the constructive case.

“Short-term, because of sentiment, the picture isn’t great,” Dori said. “But structurally, the foundation is stronger than it appears. Improving business cycle data, stablecoin growth, institutional participation, and stronger counterparty risk management set this apart from 2022.”

He concludes that bitcoin’s slump reflects liquidity mechanics and shaken confidence rather than a verdict on long-term viability. Volatility may intensify and prices could test lower levels, but if liquidity improves and macro data firm up, a market turn could arrive sooner than many expect. Beneath the turbulence, fundamentals are quietly strengthening.