Why Bitcoin Hit $95K in January 2026: Fiscal Flows Trump Fed Policy

Why is Bitcoin surging to $95,000 while bank lending growth slows?

The answer isn't in the credit markets—it's in the fiscal accounts.

TL;DR:

• US government borrowed $145 billion in December 2025 alone, injecting fresh liquidity into private sector balance sheets
• Tariff revenues up $70 billion year-over-year (4x increase), but still running $602B deficit in Q1 FY2026
• Bitcoin ETF flows flipped positive January 13 after CPI data, pushing BTC past $94,000
• Bank lending growth slowing to 3.7%—yet crypto rallies. Why? Fiscal flows matter more than credit expansion
• China stimulus (~RMB 1T) and EU stable budgets provide neutral-to-supportive backdrop

The Liquidity Paradox: Weak Credit, Strong Assets

Conventional analysis would tell you that slowing bank credit growth (US commercial loan growth at 3.7% in December, down from 4.0%) should dampen risk assets. Yet Bitcoin climbed from sub-$92K lows on January 8 to break $95,000 by January 14.

The disconnect reveals a fundamental truth: crypto follows government money creation, not private credit expansion.

Here's what's actually happening:

• Government deficit spending = direct injection of reserves into private bank accounts
• Bank lending = creation of deposits and liabilities (loans must be repaid)
• Net effect: Fiscal deficits create permanent additions to private sector net financial assets; bank lending does not

The US Treasury added $145 billion to the private sector in December alone. That's not a loan—it's a wealth transfer. No repayment required.

January 2026 Macro Snapshot: Where the Money Flows

United States: Fiscal dominance continues

• First quarter FY2026 deficit: $602 billion (October-December 2025)
• Interest payments on national debt: $276 billion in Q1 FY2026—direct transfer to bondholders
• Tariff revenue surge: +$70B year-over-year (but still running massive deficits)
• Bank lending: 3.7% annual growth, with C&I loans at 3.9% (weakening)

Eurozone: Stability over stimulus

• 2026 EU budget: €192.8 billion, focused on defense and border security
• ECB rates unchanged: 2.15% main rate, 2.0% deposit rate
• Corporate credit growth: 1.6% (unchanged from Q3 2025)
• Housing loan demand: increasing substantially, but firm lending remains weak

China: Consumption-focused stimulus incoming

• Expected incremental fiscal funds: ~RMB 1 trillion for 2026
• Focus: trade-in programs, digital consumption, rural e-commerce
• LPR rates held: 3.0% (1-year), 3.6% (5-year)
• Credit data for January 2026: not yet released (PBOC reports mid-month)
• Prior trend: muted loan growth at 6.4% YoY in November 2025

Crypto Market Impact: ETFs, Regulation, and Institutional Demand

Bitcoin ETF flows tell the story of January's volatility:

The January 13 reversal coincided with renewed clarity on inflation data—but the underlying fiscal support never wavered. The US government continued spending at a $2 trillion annual deficit pace regardless of ETF sentiment.

Regulatory developments providing structural support:

• SEC generic ETF listing standards: Accelerating new crypto ETF launches via standardized 19b-4 filings
• GENIUS Act (July 2025): Stablecoin regulation enabling institutional DeFi integration
• Strategic Bitcoin Reserve: US government establishing digital asset stockpile (BTC, ETH, XRP, SOL, ADA)
• CLARITY Act: Delayed to late January, but momentum toward crypto-commodity classification continues

Institutional adoption metrics:

• Analysts predict ~80% Bitcoin allocation among institutional funds by mid-2026
• US crypto ownership: 30% of adults
• 52% of US adults credit Trump administration for crypto value increases (whether accurate or not, sentiment matters)
• Major banks (JP Morgan, Citi) integrating blockchain for payments and tokenization

The Fiscal-Crypto Transmission Mechanism

Why does government deficit spending flow into crypto markets?

Step 1: Treasury spending credits private bank accounts (reserves increase)

Step 2: Recipients of government payments (defense contractors, Social Security beneficiaries, bondholders receiving interest) hold increased cash balances

Step 3: Excess liquidity seeks returns → flows into stocks, real estate, and increasingly, crypto

Step 4: Institutional adoption + regulatory clarity = crypto becomes legitimate portfolio allocation

This isn't speculation—it's observable in the data. The $276 billion in interest payments alone during Q1 FY2026 went directly into private sector accounts. That's risk-free income for bondholders, much of which gets redeployed into risk assets.

What This Means for Crypto Allocators

The bullish case:

• US fiscal deficits structurally expansionary (~$2T annual pace)
• China stimulus providing secondary liquidity support
• Regulatory clarity removing institutional barriers
• ETF infrastructure enabling passive flows

The cautionary signals:

• Bank credit growth slowing—private sector leverage expansion is tepid
• Global monetary policy neutral-to-tight—ECB and PBOC not aggressively easing
• Tariff policy uncertainty—trade war escalation could disrupt cross-border capital flows
• ETF flow volatility—January saw $1B+ swings in both directions within days

The Bottom Line

Bitcoin's January surge to $95,000+ is not about:

• ✗ Federal Reserve policy
• ✗ Bank lending acceleration
• ✗ Retail FOMO

It is about:

• ✓ US Treasury injecting $602B into private sector (Q1 FY2026)
• ✓ $276B in interest payments flowing to bondholders
• ✓ Regulatory frameworks enabling institutional adoption
• ✓ China preparing RMB 1T stimulus for 2026

Key takeaway for allocators: Watch fiscal flows, not Fed rhetoric. The government deficit is the crypto bid. As long as Treasury spending outpaces taxation—and January 2026 data confirms it does—liquidity will continue seeking returns in scarce digital assets.

The macro backdrop is supportive but not euphoric. Slowing credit growth and cautious global central banks temper the outlook. But with $2 trillion in annual fiscal stimulus, crypto has a structural tailwind that transcends short-term volatility.

Current prices (January 14, 2026, 8:00 AM GMT): Bitcoin $95,161 (+3.6% 24h), Ethereum $3,333 (+6.8% 24h)