- Reputed analyst explains how a liquidity crisis has begun.
- While some expect a bullish recovery, others expect a bearish slump.
- Will banks crash and cause another market crash like 2008?
It is no secret that many analysts and financial experts have identified how liquidity has been drying out for the crypto market over the past few years. This is because liquidity as a whole has been dried out, leading to risk assets like crypto taking the brunt of the pain while low-risk assets like gold continue to climb. A reputed analyst explains how a liquidity crisis has begun. Could this bode well for the crypto market?
Reputed Analyst Explains How a Liquidity Crisis Has Begun
According to one crypto expert who has been calling a massive bear market, which will lead to BTC lows of $40,000 – $60,000 in 2026, a major liquidity crisis has already begun. The expert goes on to highlight how banks are no longer borrowing from each other the way they normally do, showing that the quick liquidity banks need does not seem to be available. This is normal, especially for large banks that are always trying to maximize returns.
The analyst goes on to state that when banks see good opportunities, they borrow from each other to increase returns. This is called the Standard Repo market. One bank borrows money from another bank using MBS or bonds as collateral, and the loan is repaid shortly after. But what is happening now is very different. Banks are no longer lending to each other. Either they do not have enough liquidity to provide, or they do not fully trust that the borrowing bank will be able to repay on time because it may be facing liquidation risk.
This is exactly when the Standing Repo Facility comes into play. Instead of going to other banks for liquidity, banks go directly to the Fed because it becomes the only place where liquidity is guaranteed. The Standing Repo Facility is meant to be a backstop, usually used in stress situations, unlike the standard repo market, which is normally used to optimize returns. Recently, the Standing Repo Facility has been heavily used.
As the post above goes on to highlight, yesterday alone, we saw another $25.95 billion in overnight loans, in October we saw $107 billion, in November we saw $92 billion, and so far in December we have seen $75 billion excluding yesterday. This tells us that the standard repo market is no longer sufficient, meaning banks do not have enough liquidity or trust to lend to each other.
A Major Bank Shutdown Event?
The only real question now is whether banks are borrowing from the Fed to maximize ROI or because they urgently need liquidity to stay alive. There are rumors that large banks are desperately seeking liquidity after the silver short squeeze. Many of these banks were heavily short silver, only to see over a 50% move in just one month. They received margin calls and are now scrambling for liquidity to add margin and defend their short positions.
This move could lead to an irrecoverable chain reaction of major losses, which then leads to a fall in banks, ultimately leading to an overall market crash. Yet, many other analysts are preparing to see a bullish super cycle play out for Bitcoin and crypto in the coming New Year of 2026. What will win, a bullish recovery or a bearish slump?
