Introduction to the Current Market
The week has been marked as a "mine-clearing week" for global financial markets, with numerous significant data releases, interest rate events, and settlement dates occurring one after another. This has gradually alleviated short-term risks in the US stock market. In the cryptocurrency sector, Bitcoin (BTC) is still in a deleveraging and repricing phase following a 30%+ retracement from its October 2025 high of $126,000.
Market Dynamics and Expectations
The price of BTC has been repeatedly testing the $85,000-$90,000 range and has not yet formed a trend reversal signal. Long-term holders continue to reduce their holdings, while retail investors are withdrawing. Conversely, DATs (Distributed Autonomous Traders) and whale shark investors are increasing their holdings, indicating a complex and unresolved game in the market. Despite this, the selling trend is slowing, macro liquidity has eased, and trading enthusiasm has recovered somewhat. There is an expectation for BTC to retest $94,000 in the coming weeks.
Policy, Macro-Financial, and Economic Data
A series of significant data releases, interest rate events, and settlement dates in global financial markets has reinforced the consensus that the US economy is heading towards a mild recession in employment and a gradual decline in inflation, potentially leading to a soft landing. The US stock market initially declined before rebounding throughout the week, indicating that the market had priced in these events, and short-term risks had eased. BTC followed the US stock market’s lead, ultimately closing with a slight gain of 0.53%.
US Employment and Inflation Data
On December 16, the U.S. Department of Labor released non-farm payroll data for October and November, showing a decrease of 105,000 jobs in October and a rebound of 64,000 jobs in November, though still weak. The unemployment rate rose to 4.6% in November, the highest level since 2022. The U.S. Bureau of Labor Statistics also released November’s CPI data, showing a year-on-year increase of 2.7%, significantly lower than expected, while core CPI rose 2.6% year-on-year, also lower than expected. These data points suggest the market maintains its judgment that the Federal Reserve will likely implement two 50-basis-point rate cuts in 2026.
International Monetary Policy
On December 19, the Bank of Japan unanimously approved a rate hike, raising the policy rate by 25 basis points, reaching a 30-year high. The statement by the Bank of Japan Governor emphasized future adjustments based on data and pointed out that current interest rates remain below the projected neutral range, with real interest rates remaining negative. This has affected the USD/JPY pair, which rebounded strongly after hitting a low, reducing market expectations of a carry trade impact from yen rate hikes and dollar rate cuts.
Crypto Market Analysis
As a leading indicator of global macro liquidity, BTC has been declining since October, driven by the selling and deleveraging of high-beta assets amid liquidity constraints and the reduction of long-term holdings. According to on-chain data, the "sell-off" by long-term holders continues, with a significant amount of BTC activated into short-term holdings. The sell-off by both long-term and short-term holders reached a high level this week, but shows signs of slowing down.
On-Chain Data and Market Trends
The exchange has reversed the outflow trend, showing a slight accumulation this week. However, the 30-day rolling volume of the exchange’s sell-off is decreasing, indicating the most frenzied selling phase is passing. Selling is increasing, but funds are flowing out, with simultaneous outflows through stablecoin and ETF channels. This has been the fundamental reason for the second dip in BTC price and the weak rebound, meaning that selling pressure has not significantly decreased, but buying power is being lost.
Market Participants and Their Strategies
Retail investors are still withdrawing from the market, while buying power comes from DATs and whale sharks, a group with a high success rate in contrarian trading. They continue their actions, which have shown an extremely high success rate in the past two years of the bull market. The return of ETF funds or their continued outflow next week will likely determine the short-term trend of BTC.
Cyclical Indicators and Future Outlook
According to eMerge Engine, the EMC BTC Cycle Metrics indicator is 0, indicating it has entered a "downtrend" (bear market). This, combined with the current market dynamics, suggests that while the immediate risks such as CPI, inflation, and yen interest rate hike have been cleared, the medium-term trend of BTC remains uncertain. It could continue to rebound and retest $94,000 or even recover the short-term investor cost line of $103,000, or it might retest the bottom and completely fall into a bear market.
Conclusion
In conclusion, the financial and cryptocurrency markets are experiencing a period of significant fluctuation and adjustment. With the easing of short-term risks in the US stock market and the complex dynamics of the crypto market, investors are looking towards future data releases and policy decisions for guidance. The expectation of a "Christmas rally" and the potential for BTC to retest higher levels are balanced against the backdrop of a potentially bearish medium-term trend. As market participants await further developments, the resilience and adaptability of investors will be crucial in navigating these uncertain waters.
