U.S. Central Bank Quietly Begins to Support Bitcoin #
The interest rate on the so-called SOFR market, the key rate for the shortest-term loans in the U.S., has fallen significantly recently. This is notable because SOFR isn’t a sentiment indicator; it’s a direct measure of how tightly or loosely money is flowing through the financial system. A falling SOFR rate is often a positive signal for the Bitcoin price.
Secured Overnight Financing Rate (SOFR) falls to 3.9%, its lowest level in 3 years 📉📉 — Barchart (@Barchart) December 12, 2025
What Exactly is SOFR? #
SOFR is the rate that financial institutions pay to borrow money overnight using U.S. Treasury bonds as collateral. Because it’s based on real transactions and sits at the core of the financial “plumbing,” SOFR is considered one of the purest signals of liquidity.
The recent drop towards 3.9% shows that it has become easier to obtain cash. Banks and funds don’t have to pull as hard for money; there is simply more available.
This usually happens in two scenarios:
- The U.S. central bank actively begins to ease (for example, through interest rate cuts or QE).
- The U.S. central bank quietly prepares the system for easing, so that no shock occurs.
At the moment, the second scenario seems to be the case, with increasing elements of the first.
What’s Happening Under the Hood #
Three important factors are at play:
- Reserve Management: The Central Bank Buys T-Bills
The Fed bought about $40 billion in short-term government bonds in recent weeks. That money enters the banking system and increases bank reserves. The effect is that overnight money becomes cheaper.
- Unlimited Repo Backstop
The Fed has removed the limit on the Standing Repo Facility, allowing banks to always borrow cash against Treasury bonds. If that safety net is unlimited, the reason for stress in money markets disappears, and SOFR falls.
- More Available Collateral
Because the Fed is adding both money and collateral, it becomes easier to conduct transactions. Lenders therefore accept a lower rate.
What This Means for the Economy #
The decline in SOFR does not mean that everything is flourishing. It means that the U.S. central bank is busy lubricating the pipes while the cycle cools down. Lower inflation pressure, a weaker labor market, and increasing risks call for stability in the financial system.
The fall in SOFR and the broader liquidity expansion by the U.S. central bank are normally beneficial for Bitcoin, but the effect is not one-to-one. The impact spreads across three layers:
- More Liquidity → More Room for Risk Investments
When the U.S. central bank adds reserves and eases money markets, general risk appetite increases. This applies to stocks, gold, and Bitcoin.
Lower funding pressure makes it easier for large parties to finance positions. Bitcoin usually benefits when the U.S. central bank loosens the financial pipes. In the short term, this is likely positive for sentiment, but it does not guarantee a price increase.
- Falling Short-Term Rates → More Attractive Alternative to ‘Cash’
As SOFR falls, holding cash becomes less attractive. As a result, investors look more quickly at alternatives with higher potential returns.
Historically, we see:
- falling short-term rates support gold;
- Bitcoin often moves in the same macro cycle.
Overall, these changes are therefore positive for Bitcoin, but on their own, they are not enough to start a new bull market. For that, the digital currency needs more convincing support from the U.S. central bank.