Fundstrat's Tom Lee has warned that tightening market liquidity and risk headwinds continue to weigh on Bitcoin (CRYPTO: BTC) and other cryptocurrencies.
Liquidity Headwinds Drag On Bitcoin
Speaking on CNBC on Wednesday, Lee said Bitcoin remains “highly sensitive to liquidity conditions” and broader market risk sentiment.
He pointed to a mix of macro headwinds — from the U.S. government shutdown to a hawkish Federal Reserve stance — as catalysts weighing on digital assets.
"The Treasury general account has been building cash," Lee explained.
"That created a cascade of problems that put pressure on crypto." He added that liquidity stress is a leading factor for Bitcoin's volatility, noting that as funding pressures ease, "headwinds can turn into tailwinds."
Technical Breakdown Confirms Seller Control
BTC Technical Analysis (Source: TradingView)
Bitcoin lost its ascending trendline that supported the entire rally from May, breaking below multiple moving averages.
The 20-, 50-, and 100-day EMAs now sit overhead between $108,700–$111,700, forming a strong resistance cluster.
The daily candle also shows a clean move into the $100,000–$98,000 demand zone, an area that previously triggered aggressive rebounds.
If price fails to hold this level, the next major high-volume support sits between $94,000–$92,500, where prior accumulation occurred during the summer rally.
Lee Expects Deleveraging To Take Weeks
Lee compared the current drawdown to the major deleveraging episodes in 2020 and 2022, when the COVID shock and FTX collapse triggered widespread liquidations.
He said the Oct.10 deleveraging event was "the biggest in history," and that ripple effects are still being felt.
"The good news is there aren't a lot of bodies floating to the surface," Lee noted.
"It doesn't feel systematic, but it's going to take some time for confidence to come back."
He expects the crypto market to stabilize gradually as selling pressure eases and confidence rebuilds over the coming weeks.
Equity Correlation And Investor Sentiment
Lee also linked the weakness in digital assets to profit-taking in equities, particularly the Nasdaq 100, which has rallied for six consecutive months.
He suggested that both crypto and high-growth stocks are experiencing short-term fatigue after extended gains.
Still, Lee remains constructive on longer-term prospects, citing historical data showing markets that rise six months in a row typically post another 3% average gain in the following month.
"It's actually a good sign we've been up for six months straight," he said.
Read Next:
Image: Shutterstock
