Bitcoin Faces Liquidity Crunch as Whales Sell Off

Bitcoin‘s record-breaking run is beginning to show cracks, as analysts warn that the world’s largest cryptocurrency could soon face a severe test of its resilience.

Among the most vocal is on-chain strategist Willy Woo, who argues that the market is quietly slipping into a liquidity crunch even while prices remain near cycle highs.

Woos analysis suggests the current bull cycle differs sharply from earlier ones. Inflows of new capital — the fuel that normally powers fresh all-time highs — are fading, leaving prices propped up on thinner liquidity. He describes the pattern as eerily similar to conditions before the 2017 correction, when Bitcoin surged but the underlying structure had already begun to deteriorate.

Adding to the pressure, large holders appear to be reducing exposure. Woo estimates that between 115,000 and 120,000 BTC have been offloaded by whales over the past several weeks. For an asset so sensitive to shifts in liquidity, that level of selling is enough to tilt sentiment. If global liquidity tightens further, Woo warns, Bitcoin could tumble well below $40,000 before finding a true bottom.

The backdrop for these concerns is the Federal Reserve‘s policy cycle. Woo notes that Bitcoin has historically mirrored the Fed’s four-year liquidity rhythm — one that often intersects with U.S. election cycles. With expectations of a slowdown in capital flows ahead, he believes the crypto market could serve as an early warning sign of broader financial stress.

Notably, altcoins are struggling to replicate the explosive performances of past cycles. Woo points out that institutional money has new options, such as publicly traded firms holding BTC on their balance sheets. This shift may explain why whales are reallocating capital away from coins and into equity exposure tied to Bitcoins success.

Beyond Bitcoin and altcoins, Woo highlights the growing role of stablecoins. Tether, now a major buyer of short-term U.S. Treasuries, indirectly links crypto demand to Washingtons ability to finance its debt. At the same time, stablecoins are becoming lifelines in emerging economies where local currencies continue to falter.

Despite his near-term caution, Woo remains optimistic about Bitcoins future. He envisions the asset eventually rivaling the size of global GDP or the bond market — a trajectory that could give it a valuation between $10 trillion and $100 trillion. The journey there, however, will be uneven, marked by violent swings and periods of contraction as liquidity ebbs and flows.