The primary driver of Bitcoin’s price cycles is the U.S. Treasury Bill (T-Bill) issuance rather than the actions of the Federal Reserve (Fed), per a Feb. 18 report from Keyrock. Keyrock said fiscal liquidity is the most effective indicator of the performance of Bitcoin (BTC) and outperforms both interest rates and the expansion of central banks’ assets.
There is an 80% correlation between the net issuance of U.S. Treasury Bills since 2021 and the price action of BTC. The report states that there is usually a liquidity shift approximately eight months before price changes.
Source: Keyrock
At the time of this report, the price of BTC was approximately $66,000 according to CoinMarketCap data, as macro liquidity tightened. According to Keyrock, the Treasury Department funds the private sector via government spending before the funds flow into the financial markets.
Therefore, Treasury funding represents a lagging yet more predictable indicator of BTC direction than Federal Reserve actions. The report suggests that Treasury issuance is emerging as a more important macro signal than Federal Reserve policy.
Fiscal Funding Liquidity Influences Market Cycles
Keyrock’s analysis reveals that each 1% change in global liquidity leads to an approximate 7.6% move in Bitcoin within the following quarter. When the Treasury issues more T-Bills, the resulting increase in fiscal spending leads to rising demand for Bitcoin.
Conversely, decreased T-Bill issuance often occurs before multi-month declines in the price of Bitcoin. Therefore, the prevailing notion that rate increases or decreases represent the dominant macro trigger for cycles in cryptocurrency markets is challenged by the report.
Also, institutional investor inflows into BTC have reduced its sensitivity to macroeconomic factors. According to Keyrock, the involvement of ETFs and other larger investors has reduced the liquidity sensitivity of BTC by approximately 23%.
This accounts for why BTC reacted less sharply to recent reductions in liquidity than it had previously, even though fiscal conditions were tighter.
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Potential Catalyst For Future Increases in Liquidity
Additionally, Keyrock indicated that the upcoming US debt rollover cycle may serve as a future catalyst for an increase in liquidity. Approximately $38 trillion of the national debt is expected to be rolled over in the next four years. Most of these debt obligations were issued at near 0% interest rates.
The Treasury will need to issue significantly more short-term T-Bills to fund the estimated annual debt refinancing requirements. This is approximately $600-$800 billion annually until 2028.
According to the report, the new T-Bill issuance cycle could result in additional liquidity entering the markets. Therefore, it expects this liquidity to impact the price of Bitcoin in late 2026 or early 2027.
Why It Is Important
Fiscal liquidity will be the leading indicator of the next major cycle in Bitcoin’s price action, and not Fed interest rate policy.
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