The cryptocurrency market has been navigating through a rough patch recently, leaving many investors uncertain about the future. After strong price rallies in Q4 2024, the first quarter of 2025 has been disappointing for Bitcoin and other altcoins. Bitcoin has dropped nearly 25% from its highs, with several altcoins experiencing even steeper losses. Amid this downturn, however, one analyst has pointed out a potential turning point: U.S. liquidity may be bottoming out.

Charles Edwards Highlights Potential Lifeline for Bitcoin

Charles Edwards, the founder of Capriole Investments, has drawn attention to a possible positive shift in U.S. liquidity. On March 18, Edwards posted on X (formerly Twitter), suggesting that U.S. liquidity might be reaching a bottom. He described the liquidity chart showing the “first signs” of what could be a significant multi-year reversal.

Edwards further noted that the chart was forming an “Eve/Adam bottom,” a technical pattern known for indicating a powerful reversal. The Eve/Adam bottom consists of two shapes—an “Adam” V-shape followed by an “Eve” U-shape—resembling a double bottom, which often marks a trend reversal.

Why US Liquidity Matters for Bitcoin

The importance of liquidity in the U.S. economy cannot be overstated, especially when it comes to Bitcoin and other cryptocurrencies. Excess liquidity often finds its way into riskier markets like crypto, driving price increases. The surge in U.S. liquidity during the 2021 bull cycle is widely believed to have contributed to the explosive growth in the crypto market that year.

Currently, U.S. liquidity has remained relatively flat, which many believe explains the struggles Bitcoin and other digital assets have faced in recent months. Edwards’ prediction of a liquidity bottom, however, could signify a future increase in liquidity that may positively impact the crypto market, much as it did in 2021.

Federal Reserve and Economic Conditions

A potential boost in U.S. liquidity is also tied to broader economic factors. Edwards speculated that 2025 might be the right time for the Federal Reserve to ease its tightening policies, particularly as recession concerns rise amid President Donald Trump’s tariff policies. If the Fed shifts its stance on interest rates and liquidity injections, it could potentially inject new life into markets, including crypto.

The shift from economic tightening to loosening could encourage more capital to flow into riskier markets, including Bitcoin. Historically, periods of increased liquidity have coincided with bullish movements in the crypto space, making the possible liquidity bottom an event worth watching closely.

Bear Market Concerns Persist

Despite Edwards’ optimistic outlook, not everyone shares the same bullish sentiment. Some analysts, like CryptoQuant CEO Ki Young Ju, maintain a bearish stance on the market. Ju argues that the lack of fresh liquidity could keep the market in a prolonged bear phase. He suggests that sideways or even downward price movements may persist in the coming months as the market remains starved of new capital.

However, if U.S. liquidity indeed begins to rise, it could challenge Ju’s bearish thesis. The liquidity, while important, typically takes time to trickle into the crypto market. As such, even if liquidity increases, it may take a while before the impact is felt in Bitcoin’s price.

Conclusion

The potential bottoming of U.S. liquidity could signal a turning point for Bitcoin and the broader crypto market. If liquidity increases, it could provide the fuel needed for a market rebound, similar to what happened during the 2021 bull cycle. However, despite this hopeful development, some analysts remain cautious, warning that it may take time for liquidity to flow into crypto markets.

For now, all eyes will be on the liquidity trend and the Federal Reserve’s actions in the coming months. Whether or not this signals a Bitcoin rebound remains to be seen, but the possibility of a recovery is certainly on the horizon.