Geopolitical risks persist; is Bitcoin becoming a key indicator?

Original Title: Can Liquidity Win the Battle Against the Next Phase of the Iran War? Why Bitcoin is Becoming a Reliable Liquidity Bellwether.
Author: Joe Duarte
Translation: Peggy, BlockBeats

Original Author: Rhythm BlockBeats

Original Source:

Repost: Mars Finance

Editor’s Note: Just as the market is regaining upward momentum driven by liquidity, new uncertainties are accumulating on the other end. The Iran situation has once again fluctuated, with risks in the Strait of Hormuz re-emerging, bringing geopolitical conflict back into the core variables of asset pricing. In just a few days, the market has shifted from a “funds-driven” single logic to a dual game of “liquidity vs. risk events.”

Currently, the market is caught in a tug-of-war between “liquidity-driven rise” and “risk shocks from escalating Iran tensions.” On one hand, the Federal Reserve and the U.S. Treasury have injected nearly $200 billion into the financial system in a short period, prompting a rapid rebound in stocks and risk assets; on the other hand, geopolitical uncertainties, private credit risks, and overheated sentiment keep the market fragile.

In this structure, Bitcoin’s role is beginning to change. Unlike traditional risk assets, it is more sensitive to liquidity changes and often signals the turning points in funding environments first. From historical experience, whether it was the early decline in October 2025 or the early stabilization during this rebound, Bitcoin has played a “leading indicator” role to some extent.

Therefore, the question is no longer just “Will the market go up,” but—when liquidity is still being released and war risks re-emerge, which force will dominate pricing? If funds cannot continue to hedge external shocks, the current rise may only be a temporary mismatch; but once liquidity persists, the market could continue upward amid volatility.

Next, the key is not a single variable but their relative strength. And Bitcoin may once again become the earliest asset to provide an answer.

Below is the original text:

“Oh, think twice, because today is another day you and I are in ‘paradise’.” — Phil Collins

For traders and investors, Friday is an unusual trading day. But there is still some time before Monday, and the market is already brewing new variables—early Saturday morning news reports indicate that Iran’s stance on the Strait of Hormuz has reversed, potentially triggering market turmoil again.

Moreover, the Friday rebound has pushed the market sentiment indicator (see below) to a relatively fragile level, making a correction more likely. This has led the market into a “tug-of-war”: on one side, the large-scale liquidity injections mentioned below; on the other, the uncertainty caused by the possible reversal of the Iran war situation.

What just happened?

The impact of liquidity on the market is facing a test—the opponent is the potential escalation of Iran’s war.

Question: If about $200 billion floods into the financial system almost simultaneously, what will happen?

Answer: Asset prices will experience a dramatic “short squeeze” (melt-up).

Recently, I have been focusing on four factors that have been suppressing the stock market: the Iran war, the ongoing liquidity tightening in the financial system since January this year, the generally pessimistic market sentiment, and the lack of clear understanding of the true state of the private credit market.

But last week, these factors were almost “all overturned”: liquidity tightening reversed, the Iran situation seemed to ease, and the market’s pessimism was once again proven—often a forward indicator of potential stock market rebounds.

Have we escaped danger? No one can be sure, because the Iran situation is heating up again. Moreover, if investors re-enter “panic mode,” liquidity could dry up again. And what exactly is happening in the private credit market remains unclear.

But for now, let’s focus on a relatively observable variable: liquidity.

Dual “Liquidity Tsunami”

If you’re wondering where the funds driving the stock market rally over the past two weeks came from—think twice: the answer is the Federal Reserve and the U.S. Treasury. Both injected about $200 billion into the financial system around April 15, providing traders with a “tax day buffer.”

First, let’s look at the first “gun”—the Federal Reserve.

On April 15, the Fed injected nearly $11 billion into the market through repurchase (Repo) operations (via government bonds and mortgage-backed securities). This alone is not insignificant, but more importantly, the Fed is still continuously injecting about $40 billion per month through its Reserve Management Purchase (RMP) program.

What truly deserves attention is the second “gun”—the U.S. Treasury.

According to Garret Baldwin’s analysis, during the same period, the U.S. Treasury injected roughly $140 billion to $200 billion into the market. In other words, roughly speaking, without any formal QE announcement, the Fed and Treasury together quietly injected close to $240 billion of liquidity into the market.

It’s no wonder the stock market experienced explosive growth.

The more covert part: the Treasury’s operation

How does the Treasury accomplish this “covert operation”?

The key lies in an account—the “U.S. Treasury General Account” (TGA) held at the Fed. When this account balance rises, it usually indicates liquidity tightening; when it falls, it indicates liquidity release.

According to Garret’s calculations, around tax day, the U.S. government’s “checking account” balance at the Fed dropped from about $837 billion to about $697 billion. Then, on April 15, it rebounded to about $924 billion.

The key point is that about $140 billion had already flowed into the banking system before tax day, meaning that the financial system was actually in a “liquidity abundant” state before April 15.

Even more interestingly, the U.S. National Financial Conditions Index (NFCI), tracked weekly in this report, has reversed its previous tightening trend in the latest data (April 10).

In our Daily at “Smart Money Passport,” we already pointed out this change: “On that day, the Fed injected about $10.5B into the financial system, and the NFCI index fell for the first time since January 23, 2026. The combination of these signals may indicate that the Fed has adjusted its stance on liquidity tightening.”

The biggest question now is: can liquidity take the lead, or will a new escalation of the Iran war once again become the market’s core variable?

Bitcoin Begins to “Activate”: Why It Is the Liquidity Indicator

The next movement of Bitcoin is crucial.

Because compared to stocks, Bitcoin is more sensitive to liquidity. Therefore, its recent突破 of $75,000 and whether it can challenge the $80,000–85,000 range are worth close attention.

From a technical perspective, resistance in the $80,000–85,000 zone is not strong. The volume distribution (VBP) in this range is relatively sparse, indicating that during the previous decline, no effective support was formed. Therefore, barring extraordinary circumstances, when prices rebound, this level should not constitute a strong resistance.

If the market fails here, it implies two things: first, a lack of confidence in this rebound; second, potential issues with liquidity itself. More importantly, if Bitcoin cannot break through this key range, it may also mean that the “liquidity tsunami” created by the Fed and Treasury is rapidly receding.

If the $200 billion in bank reserves are absorbed by the market within a few weeks, that would be a dangerous signal. It could indicate that private credit markets or other external risks are accumulating.

Don’t forget, Bitcoin’s decline in October 2025 accurately foreshadowed the stock market’s difficulties in 2026. Meanwhile, Bitcoin also stabilized weeks before the stock market bottomed and rebounded early during the liquidity release by the Fed and Treasury.

In the context of the ongoing evolution of the Iran situation and persistent global risks, a weakening Bitcoin should not be ignored.

The $70,000–75,000 zone is a key support level.

Sentiment Summary: The Market Suddenly Turns Fully Optimistic

CNN Fear & Greed Index (GFI) closed at 68 on April 17, 2026, in the “Greed” zone.

CoinMarketCap’s crypto market fear and greed index was 59 early Saturday morning, indicating a relatively high “neutral” level.

The Chicago Board Options Exchange (CBOE) Put/Call Ratio is 0.65, with the index options P/C ratio closing at 0.82. Currently, overall options market sentiment remains neutral, but as bullish sentiment heats up rapidly, it is gradually leaning toward bearish territory.

The CBOE Volatility Index (VIX) closed at 17.48, a relatively positive level. However, it could rise back above 20 in the short term (often seen as a risk warning level).

It is important to note that VIX usually rises when traders heavily buy put options. Increased demand for puts forces market makers to hedge by selling stock index futures, exerting downward pressure on the market.

Conversely, when VIX declines, it indicates reduced demand for puts, market sentiment turns optimistic, and more call options are bought. This prompts market makers to buy stock index futures to hedge risks, increasing the probability of a stock market rally.

Liquidity Observation

1. Favorable: Liquidity is easing

The latest reading of the National Financial Conditions Index (NFCI) on March 27, 2026 (released April 10) was -0.47, down from -0.44 the previous week, indicating that financial conditions are easing and liquidity is improving.

A declining NFCI is generally seen as a bullish signal, and a negative value suggests the market is relatively liquid.

2. Bond yields retreat

U.S. Treasury yields declined in the latter part of this week but could rise again with developments in Iran.

The U.S. 10-Year Treasury Yield closed below 4.3% this week and broke below its 20-day moving average. If it further falls below the 200-day moving average, it would be a bullish signal; conversely, if it rises back above 4.5%, it could push yields toward the near 4.6% high in May 2025.

3. NYAD, SPX, and NDX hit new highs simultaneously

The NYSE Advance-Decline Line hit a new high, confirming the new highs in the S&P 500 and NASDAQ-100 indices.

The current upward trend is validated—but only temporarily. If it breaks below the 20-day or 50-day moving averages, the market situation could change rapidly.

The NASDAQ-100 index hit a new high last week, with 26,000 points now serving as a short-term support level.

The S&P 500 also reached a new high last week, breaking through the 7,000-point mark. The 7,000 level is now a short-term support.