Bitcoin and all cryptocurrency investors are feeling quite down. Bitcoin hasn't performed badly since the beginning of the year, but many stocks on the Nasdaq have risen much faster than Bitcoin. But October has been the real disappointment. As you know, October is called Uptober. So, people think it's a month where Bitcoin will trend upwards. That didn't happen. On the contrary, October was a bad month for Bitcoin, with a few rather sharp candlesticks. When Bitcoin does poorly, altcoins are in a state of flux. So what's happening? Is Bitcoin dead? Is Bitcoin finished? I wanted to write this article because I've observed that many crypto investors are feeling very down. In some of my previous articles, I've discussed the relationship between Bitcoin and liquidity, or the abundance of money, at length, and I've shown that over the long term, as money becomes more plentiful in the world, Bitcoin, like gold, tends to rise. Sometimes gold performs faster. This has been the case since the beginning of the year, but generally, Bitcoin's performance has far outpaced gold. This is because as money becomes more plentiful, people seek non-inflationary assets to protect their investments and money. Gold has been stronger this year because much of the world has become more confident in it.

When risk sentiment is stronger, money flows into Bitcoin. These main narratives remain unchanged. Money will always be abundant. Governments are forced to survive with these debts, otherwise they can't afford to lose it. But this doesn't mean liquidity won't shrink in the short term. First of all, the chart doesn't look too bad to me. In other words, Bitcoin consistently maintains 106,000. I won't give an exact range, but when it reaches this level, it reacts to the pressure from there and then retreats. In this context, technically, I don't see anything to panic about. We've been oscillating between these ranges for a long time. We're currently near support. But the real issue is always liquidity. By liquidity, I mean is there enough money in the market to buy Bitcoin? Unfortunately, the market has decreased throughout October. Why has this happened? There are several reasons.

Think of the US Treasury; imagine it has a bank account. How much money is in that account? We see a significant increase in that amount of money throughout October. On September 17th, September 24th, and then throughout the weeks of October, the amount of money in the US Treasury continues to rise. It's well above the long-term average. If we were to draw a line, the average US Treasury is roughly $800-900 billion. It's currently $1 trillion. An additional $150 billion has accumulated in the treasury. This is because the US government is closed. The Treasury is collecting money in some way. It's collecting it from taxes, from the sale of treasury bonds, and from traffic tickets. It's accumulating money, but because the government is closed, it's not paying salaries or paying some taxpayers. Therefore, the money is stuck there. This liquidity has been withdrawn from the market. People have gone and bought treasury bonds. They've tied up their liquidity there, or they're illiquid because they can't receive their salaries. This liquidity has been withdrawn from the market. This is the issue that's squeezing liquidity. So, where do we see the consequences and effects of this? For example, one of the things we see is the rate at which banks extend credit to each other in the overnight market. This is called SOFR.

As you know, the Federal Reserve has a short-term interest rate. They lowered it by 25 basis points. The difference between this and the interest rates realized in the interbank market that day has consistently risen throughout October. What does this mean? Banks are also experiencing a liquidity shortage. The basis of this liquidity shortage is the government's constant withdrawals. Of course, a significant amount of money has gone into these markets. Also, recently, a large portion of the money in the US has gone into stocks. As you know, stocks have been booming, and a lot of money has gone into treasury bonds. The US government is continuing to borrow heavily. This has drained a significant amount of liquidity from the market. Consequently, interest rates in the interbank market have been on the rise until Wednesday of last week. Last Wednesday, the Fed said they would end monetary tightening on December 1st. After that, interest rates have come down slightly. We'll go into more detail about this in a bit. But in any case, we see that banks are experiencing a liquidity crunch. As long as there is a liquidity shortage, money does not flow easily into risky assets like Bitcoin.

The US stock market performed slightly better than Bitcoin, but we didn't see such a spectacular performance on the US stock market in October. Because there's no money available. We see that banks are short on funds from the chart showing their cash requests to the Federal Reserve. Normally, as you know, when banks have excess cash, they go to the overnight market and repo transactions and lend the money to the Federal Reserve. The Federal Reserve pays them interest at the Fed's interest rate. This is what banks do. This way, they don't have much liquidity left, while still making money. Now, the situation is reversed. Banks are coming to the Fed and asking for money. This shows that banks are facing a serious liquidity problem. This is precisely why the Fed has halted monetary tightening. They are aware that this problem is about to worsen, and if it rises sharply, it could lead to serious financial crises.

Remember, banks have specific liquidity ratios. They are obligated to comply with them. That's why they have to show a certain amount of liquidity and cash on their balance sheet every evening. At the end of the month, they have to show a certain amount of cash on their balance sheet. If they can't find that cash, they're prepared to pay any interest. Otherwise, even their banking licenses could be revoked. That's why they go to the SOFR market. If they can't find the money there, they might come here, and this has caused a significant increase in application rates. So, the liquidity problem in America is clear. Because the Fed recognized this, starting on December 1st, they said, "I won't tighten any more." What does "tightening" mean?

During periods of monetary easing, the Fed buys American Treasury bonds and injects money into the market. During periods of tightening, when those Treasury bonds mature, they don't buy back Treasury bonds. They burn the money they have. Thus, they withdraw money from the market. Monetary tightening is a period like this. The Fed said, "We'll end monetary tightening in a certain period," and yes, we won't inject new money into the market, but we won't withdraw money from the market either. We'll repurpose some of our assets. They have mostly mortgage-backed bonds, and we'll sell them. We'll buy American bonds instead. But we won't absorb any more liquidity from the markets, he said. This will happen on December 1st, but the markets naturally anticipated this immediately, and we saw it priced in the SOFR.

Following the Fed's announcement, interest rates in the SOFR market dropped slightly. So, when will the US Treasury give up on hoarding money? As soon as the government reopens. Will the government reopen? It will most likely reopen in the first half of November. Because this has already dragged on. Unless they reopen, the problem will grow. On the one hand, there's serious liquidity pressure on the market. On the other hand, this naturally has a political impact. Thousands of people are currently not getting paid. Many suppliers who work for the government are not getting paid. I don't know how much you trust Trump, but Trump tweeted that last month they paid the military's salaries with a donation from a businessman, a donation of $100 million.

In other words, the government is becoming unable to function. Plus, as you know, the government can't produce data. For example, we can't get employment data right now. They only allocated private funds to the inflation data. Those who calculated that inflation data worked, and the accuracy of that data is somewhat debatable. Because they couldn't collect data with the usual level of detail and for a long time. Rather, I think they made assumptions about some things. Anyway, let's not confuse that now. Therefore, the government needs to reopen. I predict it will reopen in the second half of November.

The government reopening will have two effects. First, some of this accumulated cash will be released into the market. People will receive their accumulated wages. Because under American law, you get back all of that accumulated wages. In other words, your rights in the government are not harmed. The money will go to suppliers whose payments are late. They may pay off their debts to banks and loans. Perhaps the civil servants here will pay off their credit card debts. I think this will solve part of the liquidity problem. That's why the government reopening is so important. Monetary tightening ends on December 1st anyway. This means that the market will ease further, especially starting from December.

There's another issue. As I mentioned earlier, banks frequently go to the Fed asking for money. This is particularly prevalent at the end of the month. They also want to make their balance sheets look good at the end of the month. They have internal audits. They have certain regulations and laws they must comply with. After the beginning of the month, their liquidity needs suddenly diminish. Because they have another month to play with their balance sheets. Those with extensive Bitcoin experience know this. Bitcoin generally rises in the first half of the month. It tends to fall in the second half, especially in the last week. If you scan the history, you'll see a lot of this type of data. This is due to the banks' liquidity pressure. Therefore, if there are no problems and the US government reopens in November, it will most likely reopen. I think we'll be relieved.

The US Federal Reserve is ending its monetary tightening policy starting in early December. We'll see some relief from there. Monetary easing isn't coming, don't get me wrong. It won't rain down everywhere, but at least the tightening issue is over. More recently, liquidity pressure on banks has been easing somewhat since the first days of November. I believe all of this is positive for Bitcoin. There are already many positive stories about Bitcoin. In other words, there have been many positive developments on the regulatory front. The US Treasury holds a certain amount of Bitcoin. There are many positive developments. The manipulations by Trump and his cronies are a separate issue, but much progress has been made in Bitcoin's integration into the global financial system.

In this case, Bitcoin should move up slightly from here. Liquidity is needed. I expect that liquidity to ease in the US. Of course, markets are complex places, and completely different developments can occur. You never know what Trump will do. Again, do your own research. Always avoid excessive risks. But I don't think we're entering a bad period for Bitcoin. I don't know about altcoins. Because I think a large portion of altcoins are outright frauds. As you already know, they're much easier to manipulate. I won't comment on that aspect. But regarding Bitcoin and its next stage, Ethereum, I'm currently positive for November and December. I hope I'm not wrong.

I hope Bitcoin and Ethereum investors are happy. I hope I'm wrong, and altcoins also generate a lot of money. But there's no indication that altcoins will be flooded with money over the next two months. Remember, for example, that in 2022, the government was putting money in people's pockets. They were practically flooding the market with money. That's not the case now. I think it's important to remember this.

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