“Bitcoin has rebounded above $103,000, lifting altcoins.”, — write: www.coindesk.com
However, there’s a compelling reason to expect the cryptocurrency to stay above the pivotal $100,000 level and rally this week, and it’s tied to a positive shift in the US financial system that signals potential for renewed investor risk-taking.
At the heart of the story is the spread between the SOFR and EFFR, which gauges dollar liquidity conditions in the US banking sector. SOFR, the Secured Overnight Financing Rate, is the overnight interest rate that banks pay to borrow cash using Treasuries as collateral. The Effective Federal Funds Rate (EFFR) is the rate at which banks lead reserves to each other overnight without collateral.
Usually, this spread hovers in a narrow range, but late last month it surged to the highest since 2019, signaling stress and liquidity tightening in the financial system. The result? the dollar index, which tracks the greenback’s value against major fiat currencies, rose and bitcoin fell sharply, breaching the $100,000 level at one point.
But over the last couple of days, the SOFR-EFFR spread has sharply tanked to 0.05 from 0.35, erasing that spike. This reversal hints at easing financial conditions—the fear premium has faded, and liquidity is normalizing.
SOFR-EFFR spread. (TradingView)
All else being equal, tightening of this spread signals looser financial conditions, favorable for risk assets like bitcoin. And guess what, BTC is on the rise as of writing, trading above $103,000, representing a 1.6% gain on a 24-hour basis, according to CoinDesk data. ETH, XRP, SOL, BNB have gained 1.5% to 2.5% following BTC’s lead.
SRF borrowing slides, DXY rally stallsOther key indicators also point to easing liquidity stress. For instance, banks’ borrowing from the Federal Reserve’s standing repo facility (SRF), a key liquidity management tool, has dropped back to zero after peaking at a record $50 billion earlier this month, according to data from ING. Banks had borrowed billions through the SRF as a response to temporary funding pressures.
Concurrently, the dollar index’s rally has softened at resistance from the August high of 100.25, causing the upward momentum to stall. A renewed sell-off in the DXY could bode well for BTC, which is seen as a hedge against dollar debasement and a proxy for inflation protection.
Dollar Index’s daily chart in candlestick format. (TradingView)
All these factors combine to create a compelling case for bitcoin and the broader crypto market to rally in the coming week.
Key risksKeep an eye on flows into the US-listed spot ETFs, as they will need to show strength following nearly $2.8 billion in outflows over the past four weeks.
A breakout in the DXY above 100.25 could dent BTC’s bullish prospects.
A deep dive into Zcash’s zero-knowledge architecture, shielded transaction growth, and its path to becoming encrypted Bitcoin at scale.
- Shielded adoption surgedwith 20–25% of circulating ZEC now held in encrypted addresses and 30% of transactions involving the shielded pool.
- The Zashi wallet made shielded transfers the default, pushing privacy from optional to standard practice.
- Project Tachyonled by Sean Bowe, aims to boost throughput to thousands of private transactions per second.
- Zcash surpassed Monero in market share, becoming the largest privacy-focused cryptocurrency by capitalization.
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The rally comes after a broader weekly slump, with the CoinDesk 20 (CD20) index recovering from a nearly 15% drawdown over the week.
- US President Donald Trump announced a plan to pay a “dividend” of at least $2,000 to most Americans, funded by tariffs.
- The announcement led to a modest rally in cryptocurrency prices, with BTC rising 1.75% to $103,000, ETH up 3.32% to $3,487, and SOL gaining 1.85% to $160.
- The rally comes after a broader weekly slump, with the CoinDesk 20 (CD20) index recovering from a nearly 15% drawdown over the week.
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