Bitcoin could face a cash squeeze without another Fed rate hike

A New York Fed study published Nov. 12 puts modeled US bank liquidity stress at a level last seen in 2014, highlighting a funding vulnerability that could curb Bitcoin risk-taking even without another Fed hike.

The research update uses bank holding company data through the second quarter of 2026. Its liquidity stress ratio remained moderate by historical standards, at slightly above half its third-quarter 2007 peak.

The ratio compares liabilities weighted for their likelihood of withdrawal, plus off-balance-sheet exposures, with assets weighted for liquidity. Its rise since early 2022 reflects a decline in liquid assets alongside more unstable funding and off-balance-sheet exposures. That leaves banks more exposed if funding becomes harder to retain.

A separate capital measure tests a repeat of the 2022 rate shock. The modeled capital gap was $151 billion in Q2 2026, down from $161 billion a year earlier. It measures capital needed after the hypothetical shock to bring each bank's Tier 1 common equity to at least 10% of risk-weighted assets, fully reflecting unrealized securities gains and losses. That is a model benchmark, not evidence of current realized losses or a regulatory breach.

The potential transmission runs through financing and risk budgets. Banks facing more expensive or less dependable funding could become more selective about lending. Financial intermediaries dependent on that credit could then have less capacity or willingness to hold risky assets, including Bitcoin.

A separate Fed funding-shock study published in February explains how weaker capital measured at market values and reliance on uninsured deposits can raise banks' funding costs. Its results depend on the scenario: the added shock hurts profitability and capital under stagflation, but has minimal effects in a severe recession with sharply falling rates.