Rising Dollar Liquidity and Falling Exchange Reserves Could Fuel a Bitcoin Rally, Metrics Suggest

• BTC pulled back from $124.5K to ~$111K after a short correction.

• Dollar liquidity (Trade‑Weighted U.S. Dollar Index, Broad) has stopped falling and may drive flows into risk assets.

• Spot flows show $47M net buys, exchange reserves dropped to 2.55M BTC, and Binary CDD = 0, indicating long-term holders stayed dormant.

Bitcoin price outlook: BTC cooled to $111K from a $124K peak. Dollar liquidity, spot flows and dormant long-term holders suggest potential rally — read the data-driven analysis.

What is Bitcoin’s current outlook?

Bitcoin price outlook shows a healthy pullback from the August 14 all-time high of $124,474 to around $111,086 at press time. Key on-chain and market indicators — rising dollar liquidity, renewed spot net buys, falling exchange reserves and Binary CDD = 0 — point to supportive conditions for another rally if liquidity persists.

How are dollar flows affecting Bitcoin?

The Trade‑Weighted U.S. Dollar Index (Broad) has stopped falling and is climbing, which historically coincided with liquidity rotating into risk assets like Bitcoin. Analyst Joao Wedson (Alphractal) described this as renewed “dollar liquidity” entering markets. Alphractal’s Alpha Crypto Sentiment Gauge reads 54, indicating neutral sentiment that can quickly tilt bullish if flows accelerate.

Dollar liquidity on the rise

The Broad index’s uptick signals capital shifts across global markets. When the index gains momentum, institutional and macro flows often reallocate toward crypto as part of broader risk exposure.

Alphractal notes this phase may produce weeks of increased momentum — a pattern seen previously in 2021 when dollar-driven liquidity supported BTC rallies.

Source: Alphractal

Spot investors resume Bitcoin purchase

After a $243M sell-off on August 26, spot investors returned with approximately $47M in net purchases. CoinGlass data shows the netflow reversal coinciding with a steady decline in exchange reserves to ~2.55M BTC.

Lower exchange reserves often indicate coins moving into private custody, a sign of longer-term conviction among holders.

Source: CoinGlass

Long-term investors hold firm

CryptoQuant’s Binary Coin Days Destroyed (CDD) printed 0 at press time, indicating aged coins remained inactive. This metric supports the observation that long-term holders have not been offloading during the pullback.

When long-term supply is stationary and spot demand resumes, the probability of renewed upside often increases.

Source: CryptoQuant

Frequently Asked Questions

What triggered Bitcoin’s pullback from $124K to $111K?

The pullback followed short-term profit taking after the August 14 ATH. A stronger dollar index, rotating liquidity, and a temporary spike in exchange sell pressure produced volatility. Spot net buys later offset some selling, stabilizing price near $111K.

Will renewed dollar liquidity push BTC higher?

Yes — when the Trade‑Weighted U.S. Dollar Index (Broad) climbs and liquidity rotates to risk assets, BTC often benefits. Market gauges (Alphractal sentiment = 54) and resumed spot buying increase the likelihood of further upside if flows continue.

Are long-term holders selling into the rally?

No. Binary CDD at 0 indicates older coins have not been moving. This implies long-term holders are not selling, reducing available supply on exchanges and supporting price if demand rises.

Key Takeaways

• Price action: BTC corrected from $124.5K to ~ $111K after short-term profit-taking.
• Liquidity: Rising Trade‑Weighted Dollar Index can funnel macro liquidity into BTC.
• On‑chain support: Spot net buys, falling exchange reserves (~2.55M BTC) and Binary CDD = 0 signal supply restraint and potential for renewed rally.

Conclusion

Front-loaded market metrics show a cautious but constructive Bitcoin price outlook. Rising dollar-driven liquidity, renewed spot demand and dormant long-term holders together create a favorable setup for another leg higher if inflows persist. Monitor spot flows and exchange reserve trends for near-term confirmation. — COINOTAG, published 2025-08-27, updated 2025-08-27.