BTC falls below $90,000 again. What will the market do in December?

Shaw, Jinse Finance

On the morning of December 1st, cryptocurrencies once again experienced a "flash crash." Bitcoin plummeted by over $4,000 within two hours, briefly touching $86,161, a nearly 5% drop in 24 hours; Ethereum also plummeted by over $200 within two hours, briefly touching $2,813.20, a more than 5.5% drop in 24 hours. Data shows that in the past four hours, $481 million in positions were liquidated across the entire network, including $462 million in long positions and $19.14 million in short positions, with long positions being the primary target. BTC liquidations totaled $159 million, and ETH liquidations totaled $134 million.

December has just begun, and the cryptocurrency market has already dealt investors a heavy blow, with the previously slightly easing panic spreading again. What exactly is happening in the market?

With only one month left in the year, how will the crypto market perform? Will it continue its slump, and will the bear market deepen? I. Crypto Market Experiences Short-Term Plunge, Bulls Suffer Another Bloodbath This morning, the crypto market experienced another "flash crash," with Bitcoin and Ethereum both plummeting. Bitcoin fell by over $4,000 in two hours, briefly dipping below $87,000 and touching $86,161, a nearly 5% drop in 24 hours. Ethereum fell by over $200 in two hours, briefly dipping below $2,900 and touching $2,813.20, a more than 5.5% drop in 24 hours. Solana and BNB also experienced rapid short-term declines. According to Coinglass data, in the past 4 hours, a total of $481 million in positions were liquidated across the entire network, including $462 million in long positions and $19.1404 million in short positions, with long positions being the primary target. Of this, $159 million was liquidated in BTC and $134 million in ETH. In the last 24 hours, over 198,000 people across the network have been liquidated, with the largest single liquidation order occurring on Binance - ETH/USDC, valued at $14.4817 million. The recent rise in expectations of a Fed rate cut is insufficient to support a sustained rebound in the crypto market. Weak ETF holdings, selling by "whale" investors, further liquidation of long leverage, and continued tightening of domestic policies have exacerbated market panic. II. Continued tightening of domestic regulatory policies amplifies market panic. The People's Bank of China recently convened a meeting of its coordination mechanism for combating speculation in virtual currency trading. Officials from thirteen departments, including the Ministry of Public Security and the Cyberspace Administration of China, attended the meeting. The meeting demanded continued adherence to the prohibitive policy on virtual currencies and a sustained crackdown on illegal financial activities related to virtual currencies. The meeting emphasized that virtual currencies do not have the same legal status as fiat currency, lack legal tender status, and should not and cannot be used as currency in the market. Virtual currency-related business activities constitute illegal financial activities. Stablecoins are a form of virtual currency, and currently cannot effectively meet requirements for customer identification and anti-money laundering, posing a risk of being used for money laundering, fundraising fraud, and illegal cross-border fund transfers. The meeting required all units to make risk prevention and control a perpetual theme of financial work, continue to adhere to the prohibitive policy on virtual currencies, and continue to crack down on illegal financial activities related to virtual currencies. While no new regulatory policies were introduced at this meeting, it reiterated the strict prohibition on virtual currency transactions and the strict regulatory requirements for stablecoins in China. III. Unstable Macroeconomic Environment Affects Risk Asset Markets Bank of Japan Governor Kazuo Ueda stated that his policy committee may raise the benchmark interest rate this month. He emphasized that any interest rate hike would only be an adjustment to the degree of easing policy, and the authorities would make appropriate decisions on whether to proceed with policy changes. Speaking to local business leaders in Nagoya, central Japan, on Monday, Kazuo Ueda stated that the Japanese economy has recovered moderately, and the inflation rate is expected to briefly fall below 2% in the first half of fiscal year 2026 before accelerating again and roughly in line with the 2% target in the latter half of the outlook period. He noted that the trend of wages and prices rising in tandem has strengthened, and the exchange rate's impact on prices has increased. To achieve the goal of price stability, the easing policy will be adjusted as appropriate. If the economy and prices continue to improve, further interest rate hikes will be considered. According to overnight index swap data, traders expect a 64% probability of the Bank of Japan raising interest rates when its next policy meeting concludes on December 19th. The probability of action by January next year has risen to 90%. Following Ueda's speech, the yen strengthened slightly against the dollar. Prior to his speech, with rising expectations of a Bank of Japan interest rate hike, the yield on two-year Japanese government bonds had risen to its highest level since 2008. The rising expectations of a Bank of Japan interest rate hike, coupled with the uncertainty surrounding a potential Federal Reserve rate cut, have impacted the direction of risky asset markets such as cryptocurrencies. Fourth, ETF net inflows have just recovered, but institutional investment remains insufficient. Farside Investors data shows that US Bitcoin spot ETFs saw a net inflow of $73.2 million last week, while US Ethereum spot ETFs saw a net inflow of $312 million. However, BlackRock's Bitcoin spot ETF, IBIT, experienced a net outflow of $2.34 billion in November, with approximately $463 million flowing out on November 14th and approximately $523 million on November 18th, breaking previous single-day outflow records twice. Although ETF funds have seen net inflows, institutional participation has only recently resumed, and compared to the previous large-scale outflows, the amount is still insufficient to support a sustained market rebound. V. Selling by "OG" whales exacerbates downward pressure on the market. Chain analyst @ai_9684xtpa monitors that a 2016 ETH whale with a cost as low as $203.22 has allegedly sold 7,000 ETH via Wintertermute in the past month, at an average transfer price of $3,024, potentially realizing a profit of $19.745 million. Additionally, chain analyst AiYi monitors that an address that bought 1,074 WBTC four years ago at an average price of $10,708 appears to have started selling ETH after selling its WBTC. This address previously took profit on 1,000 BTC this year at an average price of $118,011, realizing a profit of $107 million. This address deposited 5,000 ETH into Binance, worth $15.36 million. Over the past two weeks, it has cumulatively deposited 13,403.28 ETH into exchanges, totaling $41.06 million. The address currently holds 15,000 ETH. The whale address "OG" has been continuously selling large amounts of crypto assets recently, putting sustained downward pressure on the market and potentially contributing to the decline. VI. Positive Factors Expected in December May Stimulate Market Recovery The Federal Reserve will officially end quantitative tightening (QT) today. It is understood that the Federal Reserve decided at its October 29, 2025 policy meeting to end quantitative tightening (QT) on December 1, 2025. The Federal Reserve began tightening monetary policy in March 2022 and started reducing its bond holdings in June 2022, a process known as quantitative tightening (QT). Since 2022, the Fed has withdrawn more than $2 trillion from the market, and its balance sheet has now shrunk to approximately $6.55 trillion. However, starting December 1st, this will change, and the Fed will stop withdrawing funds from the market. Furthermore, the Fed will announce its latest interest rate decision on December 10th. Recent statements from key Fed officials, coupled with dovish comments from leading candidates for the next Fed chairman under the Trump administration, have fueled market expectations of a 25 basis point rate cut in December. CME's FedWatch tool shows an 87.4% probability of a 25 basis point rate cut and a 12.6% probability of maintaining the current rate. The probability of the Federal Reserve cutting interest rates by a cumulative 25 basis points by January next year is 67.5%, while the probability of maintaining the current rate is 9.2%. Although the crypto market remains sluggish, potential positive factors in December may stimulate a slight market recovery. VII. Market Analysis and Interpretation December has just begun, and cryptocurrencies have already had a rough start, with the recently subsided market panic showing signs of resurgence. How will cryptocurrencies develop in the remaining month of 2025? Will the positive factors in December stimulate the market as expected, or will the crypto market continue its slump into 2026? Let's take a look at the main market interpretations.

1. A recent research report from CryptoQuant states that the total supply of ERC20 stablecoins has surpassed $160 billion in 2025, setting a new historical record. This is considered a key indicator for predicting Bitcoin price movements. The research points out that the correlation between stablecoin supply and Bitcoin price movements is more significant compared to the global M2 money supply. The report analyzes that stablecoins, as a major source of liquidity in the crypto market, can reflect investor fund flows more quickly and directly, and their supply growth often precedes Bitcoin price increases. During the 2021 bull market and the market recovery in 2024-2025, the growth in stablecoin supply significantly outpaced Bitcoin price increases. The CryptoQuant research team states that the current historically high stablecoin supply indicates a continued strengthening of underlying purchasing power in the market, which could become a significant driving force for the next round of Bitcoin price movements.

2. Matrixport chart analysis suggests that Bitcoin has just entered a rare phase: positioning, market sentiment, and macroeconomic policy are colliding simultaneously. Implied volatility has declined significantly, and the demand for crash protection has subsided, but the price remains below a key level that has historically been difficult to break through. Meanwhile, an important on-chain cost basis metric is being tested, a level that has historically distinguished between "fear" and "deep value." Adding to the tension is the renewed surge in interest rate cut expectations following the Fed's shift in tone, but history shows that this is precisely the stage where many traders misjudge subsequent price movements. Seasonal patterns point in one direction, while trend structures support the other, both supported by data. 3. Market analyst MisterCrypto believes that market conditions are ripe for a rebound in Bitcoin towards the $100,000-$110,000 range. Bitcoin's short-term structure is showing signs of stabilization after what he calls a "capitulation sell-off." He points out that indicators related to trader behavior show that large players began opening new long positions as market sentiment plunged into extreme fear, a combination that historically foreshadows a rebound during a downtrend.

4. Bitwise cryptocurrency researcher André Dragosch stated that Bitcoin is currently facing a macroeconomic environment "similar" to that during the COVID-19 pandemic. Based on the scale of previous monetary stimulus, global growth is expected to accelerate from here, suggesting that the growth momentum will continue into 2026. Bitcoin's current price seems inconsistent with the future macroeconomic outlook, so Bitcoin may still have significant upside potential.

5. BitMEX co-founder Arthur Hayes maintains his prediction that Bitcoin (BTC) will rise to $250,000 by the end of the year, an increase of approximately 170%.