A critical moment at the end of the year: What the FOMC resolution means for the crypto market
At the end of 2025, the crypto market is at a critical juncture. Bitcoin (BTC) hovered around $90,000, the Fear & Greed Index (Fear & Greed Index) fell to 25 (extreme fear), and short-term holder capitalization reached the second-highest point in history, after the bottom of the 2024 yen arbitrage crash. The FOMC meeting on December 10 has come to an end. The Federal Reserve (Fed) lowered the federal funds rate to 3.50%-3.75% if the market expected to cut interest rates by 25 basis points, but the forward-looking guidance turned hawkish — only one rate cut is expected in 2026. As a result, BTC briefly fell below the $90,000 mark. The market reaction was lackluster, and there was a “buy expectations, sell facts” correction.
However, the Fed also launched a “Reserve Management Purchase” (RMP) program to inject 40 billion US dollars of short-term treasury bond liquidity every month. This is seen as a “non-QE” sign of moderate easing, which may reshape market dynamics in 2026. In this “year-end test,” is “holding coins for the holiday season” to welcome a potential rebound, or is “falling into the bag to secure” locking in profits? Combining FOMC influence, on-chain data, institutional trends, and historical rules, this article explores allocation strategies and looks forward to the 2026 layout.
Interpretation of the FOMC resolution
Liquidity transition under hawkish interest rate cuts The FOMC meeting was the last monetary policy decision in 2025. This time, interest rate cuts were passed with a 9:3 difference, but the “bitmap” shows that the path of interest rate cuts has slowed in 2026, leaving only 25 basis points of room.
This reinforces the “hawkish interest rate cut” narrative: the Fed is concerned about a rebound in inflation and a soft landing in the job market, and is unwilling to ease excessively in the short term. The market has set an 89% chance of cutting interest rates, causing BTC to fluctuate only slightly after the incident and ETH to consolidate around $3,000.
The impact on encryption is twofold:
Short-term pressure: Hawkish guidance intensified risk aversion, and BTC did not rebound to a high of $94,000 as expected, triggering tens of billions of dollars in leveraged liquidations. Low liquidity at the end of the year (for example, perpetual contract holdings decreased by 40%-50% compared to October), compounded by Bank of Japan (BOJ) decisions, and the market is prone to “post-pump dumping.”
Long-term benefits: QT (quantitative austerity) officially ended on December 1, and the Fed balance sheet began to recover after shrinking from $9 trillion to $6.5 trillion. The RMP program is equivalent to an “invisible QE” and is expected to inject $trillion in liquidity in 2026 to drive a revaluation of risky assets. Historical data shows that inflection points in liquidity often trigger a crypto rebound (such as a sharp rise in BTC after the 2024 Fed shift). Furthermore, the explosive growth of the global M2 money supply, the weakening DXY dollar index, and China/EU stimulus policies will further tilt capital towards risky assets.
FOMC reinforces the “macro-dominant” narrative. Crypto is no longer only cyclically driven, but linked to equity/AI assets. Short-term volatility intensified, but the injection of liquidity paved the way for 2026.
The appointment of the new Federal Reserve Chairman will also be a key variable in the 2026 liquidity environment. Jerome Powell's term as chairman will officially end in May 2026 (his term as a board member lasts until January 2028). President Trump has indicated that he will announce his successor nomination in early 2026. Currently, the top candidates focus on “two Kevins”: National Economic Council Director Kevin Hassett (who advocates more aggressive interest rate cuts) and former Federal Reserve Governor Kevin Warsh (who recently visited the White House to emphasize consulting the president's interest rate views).
A chairman who is more pro-Trump and more inclined to easing policies may strengthen the 2026 interest rate cut path and accelerate liquidity injection. It resonates with policies such as the RMP plan and the national Bitcoin reserve, and further boosts confidence in risky assets.
Institutional Trend Forecast: 2026 Layout—From “Defense” to “Structural Participation”
2025 is regarded as the “first year of crypto mainstreaming,” and institutional entry is no longer a marginal experiment, but a systemic transformation. According to a16z's “State of Crypto 2025 Report”, traditional financial institutions such as Visa, BlackRock, Fidelity, and JPMorgan Chase have fully launched crypto products, while tech-native players such as PayPal and Stripe have stepped up their payment infrastructure.
This marks a shift from a “retail-led” to an “institutionally-led” paradigm: 83% of institutional investors plan to expand their crypto allocations in 2025, and DeFi exposure is expected to jump from 24% to 75%, focusing on derivatives, borrowing, and yield opportunities.
Institutional Allocation Trends: From Single BTC Allocation to Multiple Asset Portfolios
BTC is still the core, but its share is declining: BTC continues to dominate institutional positions as “digital gold” (ETF AUM has surpassed $168 billion, accounting for 60-80% of institutional crypto exposure), but institutions view it as a low-correlation diversification tool rather than a single speculative asset.
Expansion to ETH, Altcoins, and emerging assets: Institutions are adding ETH (attracting staking earnings), Solana (high TPS and institutional partners), stablecoins (payment infrastructure), and RWA (tokenizing physical assets). According to the Coinbase report, 76% of institutions plan to invest in tokenized assets in 2026, focusing on tokenized treasury, private equity and bonds, providing instant settlement and fractional ownership.
Pension funds and sovereign wealth funds are experimenting: although mostly indirect exposure (such as Norwegian funds holding BTC through MicroStrategy), 0.5-3% more direct allocations (through ETFs or tokenized instruments) are expected in 2026. BlackRock and other reports point out that sovereign funds and pension funds are facing up to encryption as long-term diversification hedging, and the allocation ratio is gradually increasing.
Historical law: BTC's “Spring Festival effect” at the end of the year
The driving force of the “Christmas low - Spring Festival rebound” model
Liquidity in the West dried up: From December 20 to early January, European and American institutions entered a holiday mode, and trading volume plummeted... In a low liquidity environment, any selling pressure will amplify fluctuations, creating a technical low.
Capital return to Asia: Around the Spring Festival (end of January to mid-February), mainland China, Hong Kong, Singapore and other places distributed year-end bonuses and red envelopes, and retail investors and high-net-worth individuals increased risk asset allocation. Historical data shows that in the first two weeks of the Lunar New Year, BTC buying volume on Asian exchanges (such as Binance and OKX) usually rises.
Institutional rebalancing: January is the beginning of a new fiscal year for institutions, and pension funds and hedge funds re-evaluate asset allocation. If BTC's performance in December is relatively resistant to decline (such as a 5-10% pullback in 2025), institutions tend to increase positions in January to catch up with benchmark earnings.
On-chain data: Intensive emergence of bottom signals
Following the implementation of FOMC hawkish interest rate cuts, the crypto market entered a typical “year-end low liquidity” phase. Bitcoin (BTC) fluctuated repeatedly in the $88,000-$92,000 range, and the Fear Greed Index fell to 25 (extreme fear). On the face of it, it looks like a “sell fact” pullback. On-chain data, however, revealed more structural signals: deep capitalization of short-term holders, continued accumulation of long-term holders, accelerated outflow of exchange reserves, and bottom characteristics of medium- to long-term indicators. These data suggest that the present is not a simple bear market, but rather a “mid-term adjustment+wash” phase in the bull market cycle.
1. Short-Term Holder (STH) Capitulation: The Pain Is Coming to an End
Realized loss scale: Over the past 30 days, short-term holders (holding <155 days) have lost more than $4.5 billion, second only to $5.2 billion when the yen arbitrage crashed in August 2024 (Glassnode data). This shows that leveraged players and retail investors have surrendered on a large scale.
SOPR indicator: Short-term holders' SOPR (Projected Output Profit Ratio) remains below 1 (average selling loss) and has been maintained for more than 3 weeks. History shows that after such deep capitalization, BTC often sees a phased bottom within 1-3 months.
2. Exchange reserves and withdrawals: the trend of capital disintermediation intensifies
Exchange BTC balance: Over the past 30 days, the network's BTC reserves have been reduced by about 120,000 (about 2.5%) to less than 2.6 million units (CryptoQuant), the lowest level since 2018.
ETH exchange reserves: Approximately 1.2 million ETH was reduced during the same period, and the withdrawal rate reached a new high in 2025, reflecting strong demand for staking and self-custody.
Stablecoin reserves: Although the exchange's USDT/USDC balance has declined seasonally, active addresses and transfer volumes on the chain are stable, indicating that the funds did not leave the market, but instead switched to cold storage and waiting to re-enter the market.
The outflow of capital from the exchange usually indicates the bottom of the price, reducing selling pressure while saving energy for a subsequent rebound.
3. Medium- to long-term indicators: the bottom signal is dense
MVRV Z-Score: Currently 1.1, entering the historical “green buying zone”.
RHODL Ratio: It has fallen to the bottom of the 2022 bear market, indicating a complete cooling of the market heat.
Puell Multiple: Miner revenue metrics have fallen back to 0.6, and historical lows are often accompanied by price reversals after mining capitalization.
Active addresses and trading volume: Despite a short-term slump, the 30-day MA did not experience a cliff-style decline, unlike the “exhaustion of activity” that peaked in 2021.
Configuration Strategy: Finding Certainty Amidst Uncertainty
The market is at a rare intersection:
Short-term fear & greed index (Fear & Greed Index 25), but on-chain data showed intense bottom-line characteristics
The historical “Christmas Low - Spring Festival Rebound” rule provides seasonal support. It has been successfully verified three times in the past five years
Macro liquidity is about to turn (end of QT, start of RMP), but it is still suppressed by hawkish guidance in the short term
The institutionalization process is accelerating, and the market structure is shifting from “speculation-driven” to “configuration-driven”
For investors seeking long-term value, the current environment provides a relatively clear risk-return framework: deep capitalization of short-term holders, accelerated outflow of exchange reserves, continued accumulation of long-term holders, and valuation indicators such as MVRV and RHODL entering the historical buying zone — every time these signals appeared in the past, they marked the opening of a medium- to long-term allocation window. For traders who focus on liquidity management, the December liquidity depletion period is both a risk and an opportunity. Maintaining sufficient flexibility, retaining ammunition when the market is panicking, and following the trend when the Spring Festival effect is verified may be wiser than chasing short-term fluctuations.
The data in this report is compiled by WolfDAO. If you have any questions, please contact us to update and process them;
By Nikka/WolfDAO (X: @10xWolfdao)
