Welcome to your morning briefing on what happened in the crypto markets overnight and what's expected during the coming day.

Good morning!

Bitcoin (BTC) continues to chop around $103,000, struggling to extend Wednesday's recovery from under $100,000. The CoinDesk 20 Index is up 2% in 24 hours alongside 18% gains in ZEC, ICP and QNT.

The crypto market currently resembles a game of musical chairs: Liquidity is shifting from one token to another, without any new influx, in what Wintermute calls a "self-funded mode."

New inflows have been slowing for months across all three channels through which capital enters the ecosystem: stablecoins, ETFs and digital asset treasuries (DATs), Wintermute said.

U.S.-listed spot ETFs, for example, registered cumulative outflows of over $1.5 billion in less than two weeks and demand from digital asset treasury firms has dropped sharply from third-quarter peaks.

Interestingly, the absence of fiat inflows comes even as the M2 money supply in major countries continues to rise. This may be because the M2 increase, driven by fiscal spending, is aimed at stimulating a global capital expenditure cycle focused on technology, particularly AI, infrastructure, and boosting domestic demand.

The key question is when will liquidity start flowing in again? Perhaps soon, as the Fed is "easing into a bubble," as Ray Dalio described in his X post, calling it inflationary. Elevated inflation could sustain demand for gold and gold-like assets such as bitcoin. Altcoins involved in AI or those linked to beneficiaries of fiscal stimulus may also perform well, while others may struggle.

For now, traders should watch bitcoin’s interaction with its 50-week simple moving average, a crucial bull market support since early 2023. A strong rebound here could signal new record highs.

In other news, crypto exchange Coinbase (COIN) urged the U.S. Treasury to ensure its upcoming rules for the GENUIS stablecoin act do not exceed statutory requirements. Decentralized exchange Lighter, which recently experienced a bot glitch that pushed HYPE’s price near $100, adopted Chainlink as its oracle partner for real-world asset derivatives.

In traditional markets, the dollar index rally is nearing resistance at the August high of 100.25. A breakout could pressure crypto further. Goldman Sachs said the U.S. Supreme Court appears increasingly likely to rule against the Trump administration’s use of emergency powers to impose tariffs, although any reductions would likely apply to smaller trading partners rather than major ones like China.

Stay alert!

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