The crypto market is falling: a full breakdown of the situation
October 17, 2025
In this post
The crypto market is deep in the red and Bitcoin has just broken below its key support, potentially putting the recent bullish trend in question. Meanwhile, gold and silver are hitting record highs as investors rush to safety. In the US, liquidity is drying up, banks are showing signs of weakness, and the Fed is running out of options. In this piece, we break down what is driving the current stress, the possible scenarios for the weeks ahead, and how to navigate this uncertain phase.
Introduction
It should come as no surprise: the crypto market is plunging this Friday. Bitcoin has dropped more than 17% from its monthly high and just broke below the 107,500 to 108,500 dollar zone, the invalidation level we highlighted yesterday in our BlockNote newsletter. Below that range, the medium-term bullish structure is broken and the market enters a phase of total uncertainty.
At the same time, gold and silver are reaching new all-time highs, trading at 4,340 and 54.3 dollars an ounce respectively. People are even lining up to buy physical gold. This rush toward safe assets signals a shift in market psychology. Investors are no longer hedging against inflation but against potential systemic risk.
In the US, a mix of tightening liquidity, renewed stress among regional banks, and a slowing credit market is putting the Fed in a corner. The question is no longer about managing inflation, but about avoiding a funding and economic crisis.
In this article, we take a closer look at the US macro picture, what it means for financial markets, the key levels to watch on Bitcoin, and how to position in the middle of this growing uncertainty.
Macro backdrop
A system running out of breath
For several months now, we have been in a phase of Quantitative Tightening as the Fed tries to restrain inflation. The problem is that the system is running out of air, and the effects are starting to become visible.
First, there is the Reverse Repo Facility (RRP). In simple terms, it is the Fed’s main reservoir of excess liquidity. At its peak in December 2022, it held more than 2.5 trillion dollars. After almost two years of tightening, there is now only around 4 billion left.
In other words, the safety cushion protecting the financial system no longer exists. That excess liquidity had allowed the Fed to keep tightening without triggering an immediate crisis. Now, every dollar drained from the system is one less available to defend it.
At the same time, bank reserves at the Fed have dropped below 3 trillion dollars, a level the institution itself considers the threshold between “ample” and “scarce” liquidity. In practice, this means banks are finding it harder to borrow cash.
This is where the Standing Repo Facility (SRF) comes in. It is an emergency backstop for banks that cannot find funding through regular interbank markets. Over the past few days, usage of the SRF has spiked.
Two years after the collapse of SVB, regional banks are once again showing signs of stress. Zions Bancorporation disclosed a 50 million dollar loss on bad loans, while Western Alliance has filed fraud claims against one of its borrowers.
Their stocks have dropped sharply, and the KBW Regional Bank Index fell 6.3% on Thursday. The situation echoes a quote from Jamie Dimon, CEO of JPMorgan, after a similar event linked to Tricolor’s default earlier this year: “When you see one cockroach, there are probably others.”
The Fed is cornered
Behind these signs, the entire US funding mechanism is gradually seizing up. Interbank markets are showing stress, repo rates are diverging, and some institutions are already turning to the Fed for liquidity rather than borrowing from the market.
The Fed’s tightening campaign, focused entirely on fighting inflation, is reaching its limit. The RRP is empty, and liquidity has been drained to the point of weakening the system’s most fragile parts: regional banks, shadow lenders, and commercial credit.
We are not in a crisis yet, but it is clear that Powell has little room left to maneuver. Historically, these situations do not last long. Either the Fed intervenes quickly to ease the system, or the stress spreads across markets.
That is why the next few weeks are crucial. The October 29 FOMC meeting is shaping up to be the key moment. Markets now price in a 65% chance that the Fed will cut rates by 25 basis points to ease conditions. Until then, every sign of tension will add pressure on Powell to move faster.
Technical outlook on BTC
From a technical standpoint, BTC has fallen below the 107,500 to 108,500 range we mentioned yesterday. That breakdown suggests the bullish structure that started after the April rebound could be broken, putting the market in a zone of complete uncertainty.
Here are the three key areas to watch:
- Gray zone (107,000 to 98,000 dollars): the uncertainty range. A weekly close inside this zone would keep the market in limbo, with both bullish and bearish outcomes still possible. It would, however, confirm the break below 107,000, which is not a great sign.
- Bull (>107,000 dollars): a weekly close above 107,000 would invalidate the breakdown and reopen the path toward 112,000 to 115,000, ahead of the October 29 FOMC meeting.
- Bear (<98,000 dollars): a weekly close below 98,000 would confirm a medium-term trend reversal, opening targets around 92,000 and potentially 75,000 if the move accelerates.
As long as BTC stays between 98,000 and 107,000, the market will remain directionless. Is this the start of a broader downtrend, or just a pause in the larger uptrend? The next few days will tell.
Just like the US financial system, crypto is compressed and close to a breaking point. The final decision now rests with the Fed and Jerome Powell. Will they step in once again to rescue the economy?
Analyst’s View
Positioning
In the current market, I remain mostly positioned in stablecoins despite some attractive price opportunities. This is not a call for caution just for the sake of it, it’s about expected value. Between 98,000 and 107,000 dollars, there is no clear directional setup, and the market could easily swing either way.
In the short term, large liquidity pockets have formed around 104,000 and between 103,700 and 102,500, while short positions are concentrated between 105,500 and 108,000. In other words, the market could easily flush both sides before picking a clear direction.
If BTC reclaims 107,000 cleanly, with volume, funding normalizing and open interest rising again, I would start taking risk back on. On the other hand, if we break below 98,000, I would rather stay out, as that would clearly mark the start of a bearish phase.
For now, today’s price action is relatively encouraging. The market is showing classic signs of a bullish environment: selloffs become oversold quickly, while recoveries take longer to become overbought.
What to Watch
The answer will likely come once again from Jerome Powell, most likely during the upcoming FOMC meeting on October 29.
My view is that we are reaching the end of the Fed’s tightening cycle, and that the central bank no longer has a choice and will have to end QT and move toward a new phase of quantitative easing (QE) to inject liquidity back into the system.
Until that decision is made official, the market remains in a zone of uncertainty where taking strong positions is difficult. To conclude, I believe the crypto market has not said its final word yet. In my view, it is more likely to consolidate for a few days before resuming its upward trend, rather than the opposite.
Still, it’s important to keep in mind that other factors could influence the market. Donald Trump remains unpredictable, and every one of his announcements triggers an immediate reaction.
More importantly, there are the ongoing trade tensions between the United States and China. Trump said today that the 100% tariffs are temporary, while the meeting between the two presidents is set to take place within the next two weeks.
