Crypto Markets Slid at Quarter End – Liquidity Tightening Behind the Drop

Weekly Summary

Last week brought turbulence to crypto markets, even though macroeconomic fundamentals remain favorable.Bitcoin and other cryptocurrencies declined as market liquidity tightened. The main reasons included the U.S. Federal Reserve's Reverse Repo mechanism (RRP), where banks withdrew liquidity ahead of quarter-end financial statements, as well as Treasury General Account (TGA) rebuilding.

ETF flows also turned negative: BTC ETF products saw $903 million in outflows andETH ETFssaw $796 million in outflows. This ended a four-week streak of inflows. Additionally, markets witnessed over $1.7 billion in liquidations from leveraged positions.

Macro Conditions Remain Crypto-Favorable, but Q3 End Tightens Cash Flow

The Federal Reserve's preferredinflation measure (core PCE) remained at 2.9%, indicating inflation is "sticky but not accelerating." The economy is slowing but not collapsing: GDP was revised to 3.8% in the second quarter, and PMI indicators point to around 2.2% growth in the third quarter.

Meanwhile, the 10-year Treasury yield rose modestly to 4.17% and the U.S. dollar strengthened slightly. These moves caused a mild 0.5% decline in equity markets, but don't change the big picture: global policy rates are trending downward, the dollar trend remains bearish, and liquidity improves in October.

Q4 Start Could Bring Quick Turnaround – Watch for One More Flush

From crypto markets' perspective, the main obstacle has been liquidity tightening due to quarter-end, but this clears in early October. Markets may still see one more "flush out" before the reversal, but no larger bear market is on the horizon. Q4 still looks very favorable for high-risk asset classes, especiallycrypto investing.

News from the Field: Circle, Cloudflare, and SWIFT Develop Next-Gen Payment Systems

Circle is exploring possibilitiesto make crypto transactions reversible in cases of fraud and hacking, while preserving final settlement.Cloudflare launched its own USD stablecoin called NET Dollar, designed specifically for automated payments by AI agents.

SWIFT is testingEthereum Layer 2 network(Linea)stablecoin-basedbank transfers in collaboration with over 12 global banks.

Kraken Raised $500 Million as IPO Rumors Intensify

Crypto exchange Kraken completed a $500 million funding round, with the company now valued at $15 billion. IPO plans for 2026 look increasingly likely. Meanwhile, Tether is targeting a $500 billion market valuation and buying government bonds massively – it's starting to resemble a sovereign wealth fund.

Europe's Major Banks Launch Their Own Stablecoin

Nine European banks(including ING, SEB, UniCredit, and Danske Bank) have joined forces to launch aMiCA-regulatedeuro-basedstablecoin. The first release is scheduled for the second half of 2026.

Deutsche Bank: A Place for Bitcoin in Central Bank Balance Sheets?

Deutsche Bank analysisraises the possibility thatBitcoincould be seen alongside gold as a central bank reserve asset in the future. This supports the thesis that Bitcoin is becoming an increasingly accepted part of the global financial system.

Options Expired: $18 Billion Impact

This week, $18 billion worth of Bitcoin options expired, causing volatility and unwinding of buying pressure. Such "max pain" situations are common before quarter transitions.

Summary: Stay Calm and HODL – Q4 Might Break the Bank

Liquidity tightening explains market weakness, not deteriorating fundamentals. Starting October, liquidity improves, rates remain under downward pressure, and the dollar weakens. All these factors support risk assets, especially crypto markets. Now is not the time to give up, but to prepare for the next rally.

Managing psychological pressureis now key – temporary market swings don't change long-term trends.