Will Bitcoin recover in 2026? Federal Reserve liquidity and institutional demand are key drivers

Source: TokenPost Original Title: Signals of Bitcoin Recovery in 2026… Fed Liquidity and Institutional Demand Drive Growth Original Link:

2026: The Favorable Environment Created by the Federal Reserve’s Liquidity Supply

Crypto service company Abra’s CEO Bill Barhydt recently mentioned the potential rise of Bitcoin in 2026 in an interview. He pointed out that the Federal Reserve has initiated an easing monetary policy, creating an environment of so-called “quantitative easing lite.” Specifically, the Fed is purchasing government bonds, injecting liquidity into the market, and interest rates are gradually decreasing, which is expected to have a positive impact on risk assets like Bitcoin.

He stated: “The Federal Reserve has started to reintroduce funds into the market. If government debt demand decreases and interest rates fall in 2026, it will benefit the entire asset class, including Bitcoin.”

Regulation and Institutional Demand Support Long-Term Growth

Barhydt believes that not only liquidity but also clearer regulation and increased institutional participation will be key factors for Bitcoin’s long-term growth. He said: “When clear regulation and low interest rates combine, the entire digital asset market could enter a strong upward phase.”

However, short-term market expectations remain cautious. According to CME Group’s derivatives data, during the January Federal Open Market Committee (FOMC) meeting, only 14.9% of traders expected rate cuts, down from 23% in November last year. This suggests that rate cuts may proceed more slowly than anticipated.

Gradual Rise, No More Annual Surges

Some analysts believe that Bitcoin is unlikely to experience the kind of short-term surges seen in the past. Matt Hougan, Chief Investment Officer of a leading digital asset firm, said: “Over the next 10 years, Bitcoin may continue to rise, but it’s hard to expect dramatic annual returns.” He added: “This cycle will be characterized by low volatility and steady growth—less flashy but solid in momentum.”

Early 2026: Accumulation Phase After Peak Adjustment

Market analyst Lynn Tran diagnosed that after Bitcoin reached a peak of about $126,000 at the end of 2025, it subsequently fell by approximately 35% to around $80,000. She pointed out that this decline signals a structural shift in the Bitcoin market, transitioning from retail investor dominance to a phase led by macroeconomic liquidity and institutional capital inflows.

Tran believes that the current U.S. benchmark interest rate of 3.5-3.75% is likely to remain unchanged in the first half of the year, making a strong rebound unlikely during this period. She stated: “Unless liquidity conditions improve significantly, Bitcoin will find it difficult to show a strong upward trend in the short term. This accumulation phase will proceed with more stability and caution.”

ETF Flows Remain Stable but Show Signs of Change

The assets under management of spot Bitcoin ETFs have exceeded $110 billion, but recent capital flows have shown volatility. This indicates that institutional investors are actively reallocating assets within their portfolios rather than making aggressive purchases, suggesting the market is seeking medium- to long-term changes rather than short-term speculation.

Market Interpretation

The shift towards monetary easing by the Federal Reserve in 2026 could lay the foundation for Bitcoin’s gradual rise. However, due to slow rate cuts, the market is expected to remain in an accumulation phase through the first half of the year.

Strategy Highlights

Rapid short-term surges in Bitcoin are unlikely; adopting a long-term diversified investment strategy may be more effective. Continuous attention should be paid to regulatory developments, institutional flows, and interest rate trends.

Terminology Explanation

“Quantitative easing lite” refers to a policy tone where the central bank does not engage in large-scale asset purchases but gradually supplies liquidity.