The champions league is a totally different atmosphere all together and many teams can attest to this because I have seen many teams that have performed poorly in the premier league but when they get to the champions league the whole form changes and I think Real Madrid is one of those teams. For now even if the draws for the round of 16 comes out I think Liverpool can take on any of the big teams because they have shown that they are stable enough.
Liverpool has shown some very exceptional strength this season and it's actually really helping them as they now obviously have a very notable and significant strength that is probably uncommon with others especially this season and this is obvious in their premier League performance and aswell as their champions League performance so far and just like you have rightly stated, they have that confidence to take on any team at the moment if they are made to face any from the rounds of 16 at the moment.
It is the consistency that sets Liverpool up above all others so far. The biggest strength I think they have is that winning with just one goal is the big advantage they have in most of the games. They don't need to score 4 times because they concede 3 times, but they score 1 goal and after that it is extraordinarily tough to beat them. They can counter, they can defend well and they are ready to play the time and every advantage that is running for them.
I never thought that the new coach would be able to put Liverpool into this position. He is doing a great job and it speaks for himself.