Author: Shaw, Jinse Finance

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

December has just begun, and the cryptocurrency market has already dealt investors a blow, with previously eased 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 brief plunge, bulls suffer another bloodbath.

This morning, the cryptocurrency market experienced another flash crash, with Bitcoin and Ethereum both plummeting. Bitcoin dropped over $4,000 in two hours, briefly falling below $87,000 and touching $86,161, a nearly 5% drop in 24 hours. Ethereum dropped over $200 in two hours, briefly falling below $2,900 and touching $2,813.20, a more than 5.5% drop in 24 hours. Solana and BNB also experienced rapid declines.

According to Coinglass data, $481 million in positions were liquidated across the network in the past four hours, including $462 million in long positions and $19.14 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 past 24 hours, over 198,000 people have been liquidated, with the largest single liquidation 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 all exacerbated market panic.

Second, the continued tightening of domestic regulatory policies has amplified market panic.

The People's Bank of China recently convened a meeting of its coordination mechanism for combating speculation and trading in virtual currencies. Officials from thirteen departments, including the Ministry of Public Security and the Cyberspace Administration of China, attended the meeting. The meeting stressed the need to continue adhering to the prohibitive policy towards virtual currencies and to persistently crack down on illegal financial activities related to virtual currencies. The meeting emphasized that virtual currencies do not have the same legal status as legal tender, 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, a form of virtual currency, currently fail to effectively meet requirements for customer identification and anti-money laundering, and pose a risk of being used for money laundering, fundraising fraud, and illegal cross-border fund transfers. The meeting required all units to prioritize risk prevention and control as a perpetual theme of financial work, continue to adhere to the prohibitive policy towards virtual currencies, and persistently crack down on illegal financial activities related to virtual currencies.

Although no new regulatory policies were introduced at this meeting, the meeting reiterated the strict prohibition of virtual currency transactions and the stringent regulatory requirements for stablecoins in China.

III. The impact of macroeconomic instability on risky asset markets

Bank of Japan Governor Kazuo Ueda indicated that his policy board may raise the benchmark interest rate this month. He emphasized that any rate hike would only be an adjustment to the degree of easing policy, and the government will make an appropriate decision on whether to proceed with policy changes. Speaking to local business leaders in Nagoya, central Japan, on Monday, Ueda said 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 stated that the trend of wages rising in tandem with prices has strengthened, and the exchange rate's impact on prices has increased. To achieve the price stability target, 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 that the Bank of Japan will raise interest rates when its next policy meeting concludes on December 19. 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, the yield on two-year Japanese government bonds had risen to its highest level since 2008 as expectations of a Bank of Japan rate hike intensified.

The rising expectations of a Bank of Japan interest rate hike, coupled with the fact that a Federal Reserve rate cut has yet to materialize, have created uncertainties in the macroeconomic environment that are impacting the direction of risky asset markets such as cryptocurrencies.

IV. ETF net inflows have just resumed, but institutional funds entering the market are still insufficient.

Data from Farside Investors 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. Meanwhile, 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 flowing out on November 18th, breaking previous single-day outflow records twice.

Although ETF funds have seen net inflows, institutional participation has only just resumed, and compared to the previous large-scale outflow of funds, the amount is still insufficient to support a sustained overall market rebound.

V. Selling by whale "OG" investors exacerbates downward pressure on the market.

Chain analyst @ai_9684xtpa monitored that an ancient ETH whale from 2016, with a cost as low as $203.22, has seemingly sold 7,000 ETH via Wintertermute in the past month, with an average transfer price of $3,024. If sold, this would yield a profit of $19.745 million. Additionally, chain analyst Ai姨 monitored 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 earlier this year by selling 1,000 BTC at an average price of $118,011, netting a profit of $107 million. This address deposited 5,000 ETH into Binance, worth $15.36 million, and has cumulatively deposited 13,403.28 ETH into exchanges in the past two weeks, with a total value of $41.06 million. This address currently still holds 15,000 ETH.

The whale address "OG" has been continuously selling large amounts of crypto assets recently, putting downward pressure on the market and possibly being one of the triggers for the decline.

VI. Positive factors expected in December may stimulate a market recovery.

The Federal Reserve will officially end quantitative easing (QT) today. It is understood that the Fed decided at its October 29, 2025 policy meeting to end QT on December 1, 2025. The Fed began tightening monetary policy in March 2022 and started reducing its bond holdings in June 2022, which is known as quantitative easing (QT). Since 2022, the Fed has withdrawn more than $2 trillion from the market, and its balance sheet has now decreased to approximately $6.55 trillion. However, starting December 1, this will change, and the Fed will stop withdrawing funds from the market.

Furthermore, the Federal Reserve will announce its latest interest rate decision on December 10th. Recent statements from key Fed officials, coupled with dovish remarks from leading candidates for the next Fed chair 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 in December and a 12.6% probability of keeping rates unchanged. The cumulative probability of a 25 basis point rate cut by January is 67.5%, while the probability of keeping rates unchanged is 9.2%.

Although the crypto market remains sluggish, positive factors that may emerge in December could stimulate a slight recovery.

VII. Market Analysis and Interpretation

December has just begun, and cryptocurrencies have gotten off to a bad start, with market panic that had just subsided showing signs of resurgence. With only one month left in 2025, how will cryptocurrencies fare? Will the positive factors of December stimulate the market as expected, or will the cryptocurrency downturn continue 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 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: a simultaneous clash between positioning, market sentiment, and macroeconomic policy. Implied volatility has declined significantly, and the demand for crash protection has subsided, yet 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 phase where many traders misjudge subsequent price movements. Seasonal patterns point in one direction, while trend structures support another, both supported by data.

3. Market analyst MisterCrypto believes that market conditions are now in place to propel Bitcoin towards the $100,000-$110,000 range. Bitcoin's short-term structure is showing signs of stabilization, following 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 often 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, suggesting this growth momentum will continue until 2026. Bitcoin's current price appears inconsistent with future macroeconomic prospects, therefore, Bitcoin may still have significant room for appreciation.

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%. Hayes believes Bitcoin has bottomed out, with last week's drop to $80,600 marking the bottom, and it has since rebounded by about 12%. Hayes points out that the US liquidity tightening cycle is nearing its end, with the Federal Reserve cutting interest rates by 25 basis points in October. The market expects quantitative tightening (QT) to end as early as the beginning of December, with an 87% probability of another rate cut on December 10th. Coupled with the reset effect of the cryptocurrency market leverage liquidation on October 11th, this will provide upward momentum for Bitcoin. Although he acknowledges that his prediction may be flawed, he remains optimistic in the long term.

6. Crypto analyst Ali wrote , "Bitcoin (BTC) typically recovers after on-chain traders have lost more than 37%. Currently, that figure is at 20%."

7. Cryptocurrency sentiment analysis platform Santiment predicts that Ethereum (ETH) prices may rise by nearly 7% in the short term, based on the current low stablecoin yields, which suggests the cryptocurrency market has not yet overheated. In a report released on Saturday, Santiment stated, "Currently, stablecoin yields are low, around 4%. This indicates the market has not yet reached a major top and still has room for further gains." The platform also predicts that Ethereum may soon test the $3,200 resistance level.