Liquidity Retreat: Decrypting the Christmas Rally and Market Structure Shift in 2026
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Liquidity Retreat: Decrypting the Christmas Rally and Market Structure Shift in 2026
From a historical cycle perspective, the traditional bear market time window has already opened.
Navigating Web3 tides with focused insightsAuthor: Hotcoin Research
Crypto Market Performance
Currently, the total market capitalization of cryptocurrencies stands at $2.95 trillion, with BTC accounting for 59.1%, or $1.74 trillion. The stablecoin market cap is $318.4 billion, down 0.28% over the past seven days, marking another weekly decline. USDT accounts for 60.54% of this segment.
Among the top 200 projects on CoinMarketCap, most declined while a few rose: BTC fell 1.4% over seven days, ETH dropped 1.89%, SOL declined 2.84%, NIGHT gained 22.03%, and H surged 28.88%.
This week, U.S. Bitcoin spot ETFs saw net outflows of $589 million; U.S. Ethereum spot ETFs recorded net outflows of $80.3 million.
Market Outlook (December 29 - January 2):
The current RSI index is 51.46 (neutral range), the Fear & Greed Index is 22 (lower than last week, indicating general fear), and the Altseason Index is 37 (neutral, unchanged from last week).
The core driver behind recent market movements is leveraged liquidation amid thin liquidity:
Event-driven: Around Christmas Eve (December 24), the market experienced a flash crash without any major negative news, with Bitcoin plunging $2,300 within 45 minutes, triggering over $66 million in long liquidations. This highlights how shallow market depth during holidays makes prices highly susceptible to sharp swings caused by large orders or margin calls.
Liquidity: As previously noted, both Bitcoin and Ethereum spot ETFs continued to see net outflows before the holiday, weakening institutional buying support and making the market more fragile.
Technical analysis: All three major assets are currently oscillating above key support levels. Whether BTC can hold $85,000, ETH stabilizes around $2,900, and SOL maintains above $120 will be critical in determining if the market can halt its decline.
BTC core range: $83,000–89,000
ETH core range: $2,750–3,050
SOL core range: $115–130
As shown in the chart, the current realized profit ratio (SOPR) for long-term Bitcoin holders is 1.53. In a typical bull market, this value would be in the lower range; in a bear market context, it’s neutral—far from the panic-driven lows seen at bear market bottoms.
The macro environment underpinning this market cycle has fundamentally shifted: cryptocurrencies are transitioning from being restricted by multiple countries to gaining legislative recognition in mainstream markets like the U.S.; market control has also gradually moved from early miners to major Wall Street institutions.
Facing this new market structure, we should neither mechanically apply the old "four-year cycle" theory nor blindly extend bullish thinking. Looking ahead to 2026, the market will simultaneously face risks and opportunities:
Risks lie in the fact that, historically, traditional bear market timing windows have opened.
Opportunities stem from the high likelihood of the Federal Reserve entering a rate-cutting phase, potentially injecting sustained global liquidity. Meanwhile, asset managers and public companies continue accumulating, providing solid structural demand.
Therefore, even if the market enters a correction phase, its duration may be shorter, with strong support at the bottom. Based on this, we boldly predict that the bear market floor for this cycle will fall between $50,000 and $60,000.
Understanding the Present
Weekly Recap
1. On December 21, regarding the "50 million USDT phishing attack," the Ethereum Community Fund posted on X urging an end to the practice of truncating addresses with ellipses (e.g., 0xbaf4b1aF...B6495F8b5). Full address visibility is essential, as hiding middle portions creates unnecessary risk. Some UI options currently provided by wallets and block explorers also pose security issues—all of which are solvable;
2. On December 24, U.S. equities extended gains, with the S&P 500 approaching 6,900 points, just under 10 points shy of its all-time closing record. Additionally, the Dow rose 0.18% intraday, and the Nasdaq gained 0.27%;
3. On December 24, approximately $23.6 billion worth of Bitcoin options expire this Friday—the largest expiry in Bitcoin history. Analysis shows this expiry is exceptionally large and overall skewed bullish. The max pain point (where option buyers lose the most and sellers gain the most) is $96,000, reinforcing upward price momentum;
4. On December 24, according to Cointelegraph, Aave founder Stani Kulechov faced criticism for spending over $10 million to buy AAVE tokens, with some in the crypto community suggesting the move was aimed at increasing his voting power in a key governance proposal;
5. On December 25, USD1's market cap surpassed $3 billion, reaching $3.011 billion, up 7.68% in 24 hours. Previously, Binance launched a USD1 flexible savings product offering yields as high as 20% annually;
6. On December 26, blockchain-related mentions in SEC filings surged throughout 2025, peaking at around 8,000 in August and remaining elevated in November. Bitcoin-related references drove this growth, dominating filing activity. Filings and amendments related to Bitcoin spot ETFs increased, while traditional asset management firms continued expanding their crypto offerings in 2025.
Macroeconomic Overview
1. On December 24, initial jobless claims in the U.S. for the week ending December 20 came in at 214,000, below the expected 224,000;
2. On December 23, according to CME's "Fed Watch" tool, after today’s macroeconomic data release, the probability of a 25-basis-point rate cut by the Fed in January 2026 dropped to 13.3%, with an 86.7% chance of rates being held steady. Last week, the odds of a January cut had risen to 31%. The preliminary inflation-adjusted annualized Q3 GDP growth rate was recorded at 4.3%, the strongest since Q4 2023. The probability of unchanged rates through March 2026 stands at 54.4%, a cumulative 25-basis-point cut at 40.7%, and a 50-basis-point cut at 4.9%.
ETF
Data shows that between December 22 and 26, U.S. Bitcoin spot ETFs recorded net outflows of $589 million. As of December 26, GBTC (Grayscale) has seen cumulative outflows of $25.14 billion, currently holding $14.504 billion, while IBIT (BlackRock) holds $67.652 billion. The total market cap of U.S. Bitcoin spot ETFs is $116.673 billion.
U.S. Ethereum spot ETFs recorded net outflows of $80.3 million.
Looking Ahead
Project Updates
1. Web3 game ChronoForge announced it will cease operations on December 30 due to "many obstacles," including funding shortages, forcing the founder to self-fund development since July and cut 80% of staff. "After discussions with the Rift Foundation, we believe we cannot sustain the game or token operations. ChronoForge will discontinue service on December 30, 2025";
2. WLFI announced the zero-fee USD1 campaign on the BNB ecosystem has been extended to December 31, allowing users to transfer, withdraw, and bridge USDC and USD1 across CEXs, wallets, and cross-chain bridges without fees;
3. BYEX (Baoyi) is即将 shutting down; users must withdraw assets by December 31;
4. Rabby Wallet announced that the backend API for Rabby Desktop will cease service on December 31. This change does not affect user funds, which remain fully secure and accessible via the Rabby browser extension;
5. StarkWare launched a $1 million OP_CAT research fund to support studies on the pros and cons of activating OP_CAT on Bitcoin. Research proposal submissions close on January 1, 2025.
Key Events
1. FTX's fourth-round compensation is expected to begin in January 2026, with eligibility confirmation possibly due in December, though exact dates await official announcement;
2. Turkmenistan's virtual asset regulatory bill takes effect on January 1, aiming to attract investment and promote digitization. The law establishes a regulatory framework for creating, storing, issuing, using, and circulating virtual assets within Turkmenistan and defines their legal and economic status;
3. The Basel Committee plans to implement a bank crypto asset risk disclosure framework on January 1, 2026, including standardized public templates and forms covering banks' crypto risks. These disclosures aim to improve transparency and support market discipline;
4. Switzerland’s automatic exchange of tax information involving crypto assets is expected to take effect on January 1, 2026. This expansion means financial institutions will be required to collect and report customer data related to crypto holdings;
5. The UK government will enforce new crypto tax rules starting January 2026, cracking down on tax avoidance. Under these guidelines, crypto exchanges operating in the UK must begin collecting detailed transaction records and full information from all UK customers. HMRC will use this data to cross-check tax returns for compliance, imposing penalties on violators. The new guidance aligns with the OECD’s Crypto-Asset Reporting Framework to enhance transparency in digital asset markets;
6. HMRC requires crypto firms to report every customer transaction starting 2026, with non-compliant or inaccurate reporting subject to fines of up to £300 ($398.4) per user;
7. On January 3, the U.S. will release initial jobless claims (in thousands) for the week ending December 27.
Token Unlocks
1. Jupiter (JUP) will unlock 53.47 million tokens on December 28, valued at approximately $10.7 million, representing 1.73% of circulating supply;
2. Kamino (KMNO) will unlock 230 million tokens on December 30, worth about $11.69 million, or 5.35% of circulating supply;
3. EigenCloud (EIGEN) will unlock 36.82 million tokens on January 1, valued at roughly $14.31 million, or 9.74% of circulating supply;
4. Ethena (ENA) will unlock 40.63 million tokens on January 2, worth approximately $8.64 million, or 0.56% of circulating supply;
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Hotcoin Research, as the core research arm of Hotcoin Exchange, aims to transform professional insights into practical tools for investors. Through our "Weekly Insights" and "In-depth Reports," we analyze market trends. Our exclusive column "Top Picks" (powered by AI and expert screening) helps identify promising assets and reduce trial-and-error costs. Each week, our analysts host live streams to discuss hot topics and forecast trends. We believe that informed guidance combined with human touch can help more investors navigate market cycles and capture value opportunities in Web3.
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