In late 2025, the cryptocurrency market experienced a significant correction, with Bitcoin falling below the critical $100,000 mark. This downturn was driven by a combination of tightened monetary policy, internal market liquidations, and a shift in global risk appetite, testing the resilience of both institutional and retail investors.
The Market Correction in Focus
The downturn saw Bitcoin break below the psychologically important $100,000 level, a price point it had held for six consecutive months prior. At its lowest, Bitcoin touched $99,700, erasing gains from the previous months and marking its lowest point in half a year. The sell-off was not isolated; it was part of a broader exodus from risk assets, with the cryptocurrency market losing $500 billion in value over a three-day period.
This decline triggered massive liquidations, wiping out over $1 billion in leveraged positions within 24 hours, including hundreds of millions in both Bitcoin and Ethereum positions. The fear spread to traditional equity markets as well, with the S&P 500 and Nasdaq Composite also falling sharply. The sentiment among investors, as captured by analytics firms, deteriorated significantly, with social media filling with worry and caution.
A Perfect Storm of Macroeconomic and Internal Pressures
The correction was the result of several powerful forces converging simultaneously on the market.
A primary driver was a shift in monetary policy expectations. Investors were forced to recalibrate their outlook as the likelihood of a December interest rate cut from the U.S. Federal Reserve diminished. With the cost of capital expected to remain high, the appeal of non-yielding, speculative assets like cryptocurrencies waned. This tightening of financial conditions occurred alongside a unique drain on market liquidity resulting from the U.S. government shutdown, which temporarily created a fiscal surplus and removed liquidity from the financial system.
Internally, the market’s structure amplified the downturn. The crypto ecosystem was still reeling from a historic leverage purge in mid-October that had wiped out $19 billion in futures positions. This left the market fragile and prone to further cascading liquidations, which resurfaced during the November sell-off. In this risk-off environment, capital consolidated into Bitcoin, increasing its market dominance as altcoins suffered steeper losses. As one analyst described it, the market sentiment was “absolutely shattered”.
Diverging Analyst Views and the Path Forward
Despite the bleak short-term picture, the event led to a clear divergence in market behavior and expert opinion, offering a nuanced view of the future.
On one hand, data revealed that large holders, or “whales”, were accumulating Bitcoin during the dip. These addresses purchased approximately 29,600 BTC (worth around $3 billion) in a single week, marking their first major accumulation phase since September. This suggested strong conviction in Bitcoin’s long-term value at these levels.
Prominent analysts offered varying interpretations. PlanB, creator of the Stock-to-Flow model, viewed the correction as a mid-cycle pause rather than a cycle top, noting that the market had not reached the “mania” phase typical of peaks. Others, like Arthur Hayes, linked the slump directly to a short-term liquidity crunch from U.S. fiscal policy. He and others predicted that a resumption of government spending in early 2026 would act as a form of “covert quantitative easing”, potentially igniting Bitcoin’s next rally.
Institutional demand, channeled through spot Bitcoin ETFs, presented a stabilizing counterweight, even as it showed signs of moderating. Looking ahead, the market’s trajectory is expected to remain tightly coupled with macroeconomic developments. The key milestones to watch are the Federal Reserve’s decisions on interest rates and the pace at which the U.S. government resumes its spending, which could unlock the liquidity needed for a sustained recovery.
