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Private credit fund managers have capped investor withdrawals recently, tightening liquidity across markets days before the Federal Reserve’s March policy meeting. The restrictions raise concerns that investors trapped in credit funds may sell liquid assets such as Bitcoin and Ethereum to raise cash. The Federal Open Market Committee meets March 17–18, and crypto markets already show fragile sentiment ahead of the rate decision.
Five major private credit firms have limited redemptions since late February. The group includes Blue Owl Capital, BlackRock, HPS, Cliffwater, and Morgan Stanley. Their actions have created a ripple across credit markets. Investors now face restricted access to capital while risk sentiment weakens.
At the same time, Bitcoin has historically struggled around Federal Reserve policy meetings. Datasets show that the asset fell after seven of eight FOMC meetings during 2025. The Fear and Greed Index now signals extreme fear across the crypto market, levels not seen since 2022.
The convergence of private credit stress and a major central bank meeting has placed crypto liquidity under intense scrutiny. Could a credit squeeze force investors to sell Bitcoin and Ethereum during an already fragile market moment?
The wave of withdrawal limits began with Blue Owl Capital. Soon after, several other private credit firms introduced similar restrictions. BlackRock, HPS, Cliffwater, and Morgan Stanley all capped investor redemptions within weeks.
These limits triggered a chain reaction across credit funds. Once one vehicle blocks withdrawals, investors often rush to redeem capital from other funds before new gates appear. This dynamic spreads pressure across the sector.
Cliffwater’s $33 billion flagship fund recently faced heavy redemption requests. Investors attempted to withdraw roughly 14% of assets in one quarter. The fund restricted withdrawals to 7% of assets.
Morgan Stanley’s North Haven Private Income Fund also limited withdrawals. The fund capped redemptions at 5% of shares. It returned $169 million to investors, about 45.8% of the requested amount. Bitcoin advocate Justin Bechler tracked the trend publicly. He reported that five private credit firms had blocked or scrambled investor withdrawals within three weeks.
Investors who cannot access capital inside those vehicles must seek liquidity elsewhere. Bitcoin and Ethereum rank among the most liquid assets held by many institutional investors. As a result, they often become the fastest source of cash during financial stress.
Meanwhile, Business Development Companies, which finance small and mid-sized firms, now trade at roughly 0.73 times net asset value. That level marks the deepest discount since 2020 and signals rising caution among credit investors.
The Federal Reserve’s policy meeting arrives during this tightening liquidity environment. According to the CME FedWatch Tool, markets expect a strong probability that the Fed will keep rates unchanged next week. Investors assign more than a 99% chance that the benchmark rate remains between 3.50% and 3.75%. Markets already price in that outcome.
Still, the tone of the Federal Reserve’s communication remains critical. Any hawkish message from Chair Jerome Powell could intensify de-risking across credit markets. Recent market reactions illustrate the risk. Bitcoin fell from $90,400 to $83,383 within 48 hours after the January FOMC rate hold.
If similar selling appears during the upcoming meeting, analysts note that Bitcoin’s $62,300 support level could face pressure. The private credit liquidity squeeze adds another layer of risk during that period.
Also Read: Bitcoin Hits Range High: Will a Pullback Send BTC to $62.8K?
Recent disclosures also reveal growing exposure within private credit markets. Deutsche Bank reported that its private credit portfolio reached €25.9 billion, or about $30 billion, this year.
The figure represents a 6% increase from 2024 levels. Technology lending within that portfolio expanded rapidly. Loans to software companies rose more than one-third to €15.8 billion. The bank also increased lending tied to data center financing. A senior executive said the institution had placed large bets on AI infrastructure funding.
This shift introduces new credit risks. Software companies face disruption from artificial intelligence competition. At the same time, rapid expansion in AI infrastructure lending may create its own speculative cycle. Institutional investors already show signs of caution. Put option open interest on major U.S. credit exchange-traded funds reached a record 11.5 million contracts.
Those positions doubled over the past year and surpassed levels seen during the 2022 market stress. Credit spreads also widened across the technology sector.
High-yield spreads in tech debt reached 556 basis points. That level represents a 195-point premium above broader high-yield benchmarks. The figures show how aggressively institutional investors now hedge against credit market instability.
Private credit funds have capped investor withdrawals just days before the Federal Reserve’s March FOMC meeting, tightening liquidity across markets. As investors struggle to access capital, liquid assets such as Bitcoin and Ethereum may face selling pressure. Market participants now watch the Fed’s tone closely as credit stress and crypto sentiment converge.
