Bitcoin: Where Next? — The Liquidity Lie

In this latest CIO paper, Russell Thompson examines the relationship between Bitcoin and global liquidity — and why conventional liquidity measures may be misleading investors.

While broad indicators such as M2 have continued to rise, Bitcoin has declined sharply since late 2025. This report argues that the key driver is not the absolute level of global liquidity, but the flow of liquidity between the financial system and the real economy.

By analysing indicators such as the SOFR–IORB spread, Treasury liquidity dynamics, and shifting macro conditions, the report explores why financial liquidity tightened through late 2025 and how this has affected risk assets, including Bitcoin.

Looking ahead, the report outlines potential policy responses from the US Treasury and Federal Reserve, and what they could mean for global liquidity, risk assets, and the medium-term outlook for Bitcoin.