Liquidity lifts Bitcoin (BTC), but ‘halving cycle’ fears could limit rally in 2026, says Schwab

Bitcoin’s BTC$93,311.05 price continues to reflect a complex mix of macro trends and market-specific events heading into 2026.

BTC is shaped by three long-term forces and seven short-term, according to Jim Ferraioli, director of crypto research and strategy at the Schwab Center for Financial Research.

The long-term factors are global M2 money supply, bitcoin’s disinflationary supply growthn and adoption. Short-term drivers include market risk sentiment, interest rates, U.S. dollar strength, seasonality, central bank excess liquidity, the supply of large bitcoin wallets, and financial contagions.

Several of those short-term variables appear to be aligned in bitcoin’s favor as 2026 begins. Ferraioli noted that credit spreads remain tight and the market has already flushed out many of the speculative derivative positions that helped drive the sharp selloff in late 2025.

A “risk-on environment in equities should be supportive of crypto – the ultimate risk asset,” he said.

Monetary policy could also play a tailwind. “We believe rates and the dollar will continue to go lower this year,” he added. “Liquidity is supportive with quantitative tightening ended and balance sheet expansion started up again.”

Still, headwinds remain. Adoption could slow in the first half of the year, especially after the late-2025 volatility, although Ferraioli sees potential for a turnaround if regulatory clarity improves. “Passage of the Clarity Act could accelerate adoption in true institutional investors,” he said.

There’s also the halving cycle to consider. “The third year of the halving cycle has historically been a bad year. Since there are a lot of crypto investors who follow that cycle theory, that could weigh on prices,” he argued.

Since 2017, bitcoin has typically gained about 70% from its annual low each year, though that measure is meant to smooth out volatility. While 2026 is expected to be a positive year, returns will likely fall well short of that historical average, according to Ferraioli.

He also flagged a possible shift in how bitcoin moves in relation to traditional assets. He expects the crypto to be less correlated to other asset classes and macro factors. “It is still very correlated to megacap AI stocks, but correlation to broader equity indexes has been falling,” Ferraioli. said.