Following a month of expectation resets, the Bitcoin market's tight connection to macro policy and liquidity is clear. Though this opens the door for a wider discussion on Bitcoin's valuation (using both on-chain and off-chain data)¹, this article provides an immediate analysis of the recent price drop and the signals to monitor right now. Our conviction is that the current market structure is built for consolidation, not reversal, barring any systemic risks. Here is the analysis.

What happened to Bitcoin in November?

• After undergoing its toughest two weeks of the year, crypto sentiment has hit lows not seen since the October 10 mass-liquidation and the earlier "Liberation Day Shock". 
• In the past month, the total crypto market cap has shed more than $1T from its October high. This includes the recent 6–8% decline observed last week.
• Bitcoin's drop to a seven-month low of $81K reflects a broad market repricing, as investors reduce exposure due to renewed macro uncertainty and tightening liquidity. The move was exacerbated by $2B in forced liquidations (part of $30B since Oct 10).

Macro drivers behind the market shift

The dominant catalyst for the recent crypto correction was the sharp repricing of monetary-policy expectations, fueled by the Federal Reserve and ECB pushing back on aggressive rate-cut forecasts. Markets pivoted to a more restrictive outlook in response, directly impacting liquidity-sensitive assets such as Bitcoin and the broader crypto market.

Policy and liquidity repricing

• Rate-cut expectations collapsed: The government shutdown and resulting data blackout caused US rate-cut odds to plummet from over 60% down to roughly 25%, injecting significant uncertainty into the economic outlook. Despite this initial caution, market expectations have since reversed course, pushing the probability of a rate cut back up to 85%.
• Broader liquidity indicators weakened: Net liquidity has tightened, putting pressure on crypto markets. A high Treasury General Account and ongoing balance-sheet reduction are pulling cash out of the system, while reverse-repo balances are already near zero. A similar setup occurred during the 2023 TGA rebuild, when liquidity drains caused Bitcoin to stall or drift lower until conditions improved. Today’s elevated TGA is creating a comparable environment by leaving less money available for risk assets.

• The US dollar strengthened: Safe-haven flows led to a stronger US dollar (DXY), which is typically negative for Bitcoin. The dollar's strength draws capital back into USD assets, dampens global risk-taking, and has maintained an inverse correlation with BTC performance 78% of the time in 2025.

Equities, credit, and correlation dynamics

• Equity and credit markets deteriorated, signaling broad de-risking: The S&P 500 pulled back, high-yield spreads widened, and equity volatility surged, with the VIX climbing more than 65% at its intra-month peak. 
• Bitcoin's 30-day correlation with the tech complex has surged: 0.77 with VGT, 0.70 with QQQ. This high linkage shows that crypto is currently trading as a leveraged expression of tech stocks, rather than serving its traditional role as a macro hedge.

• Tightening link between Bitcoin and tech/AI stocks: Since Bitcoin was behaving as a tech-correlated asset in 2025, AI executives’ plea for government support² triggered a sector-wide drop that pulled Bitcoin down alongside the indices where the S&P 500 lost over 5% and the Nasdaq fell more than 8%.

Positioning and sentiment

Crypto sentiment reflects caution (leverage cooled, risk appetite pulled back, ETF demand has softened), yet the market is not deeply bearish. Usage metrics and select tech signals still point to underlying resilience. Overall, the market remains defensive but not distressed.

• Funding rates and open interest: Funding rates for BTC (2.4% annualized) and ETH (4.6% annualized) have reset to quarterly lows, with open interest at ~$129B. This signals that leverage has been flushed rather than built up, with positioning leaning mildly defensive rather than aggressively short.
• Long/short positioning: The market currently reflects caution, not capitulation, sitting near a 48%/52% long-to-short ratio ³ – trading volume is slightly favoring shorts.
• ETF Flows: MTD net flows into US spot Bitcoin ETFs sit around $3.5B ⁴, significantly below prior months, yet cumulative YTD flows of ~$22B highlight that long-term demand remains elevated. Compared with other asset classes, this puts Bitcoin ETFs in the mid-tier - well below the hundreds of billions going into core equity and bond ETFs, but noticeably larger than most other alternative categories and a meaningful share of the roughly $90B flowing into U.S. alts and commodities this year. Overall, the softer November flows look more cyclical than structural, with institutional investors still active⁵.
• Fear & Greed Index: Fear and Greed have rebounded modestly to 15 ⁶ after briefly reaching 10, yet remain lower than the FTX crash of November 2022.
• Macro commentary (Fed & data backdrop): Though Fed officials are divided ⁷, commentary suggests a shift toward a December rate cut. Market hesitation to price aggressive easing (due to data blackout uncertainty) is keeping crypto broadly muted.
• AI Momentum Stabilizes Tech Outlook: Tech sentiment remains resilient, lifted by Nvidia’s ⁸ strong earnings and the US “Genesis Mission” ⁹ AI initiative, dubbed a “Manhattan Project for AI.” This renewed optimism has eased fears of an AI bubble. While some cooling is likely, AI remains a core growth driver: data-center investment and AI-equity wealth effects continue to support consumption – unlike the 2000–2001 dot-com era, when spending collapsed as valuations unwound.
• Crypto usage and application-level metrics: Usage across leading protocols remains firm. Platforms such as Hyperliquid, Aave, and Jupiter ¹⁰ continue to post weekly revenues in line with the year’s average, suggesting underlying activity remains stable despite price weakness. This reinforces that fundamentals have not materially deteriorated.

So what should we keep an eye on?

Given that crypto continues to trade as a high-beta proxy for global liquidity and risk appetite, near-term price action will be guided by several key factors. The following are the most relevant macro, regulatory, and market-structure signals to monitor.

Macro Pressures and Catalysts 

• Stronger USD (DXY): A firm dollar typically tightens global liquidity and weighs on high-beta assets such as crypto.
• FOMC minutes and rate expectations: Crypto remains highly sensitive to changes in the outlook for interest rates and liquidity. Markets now assign nearly 85% probability to a 25 bps rate cut from the Fed.
• Upcoming data releases: GDP, CPI, PPI, and labor-market data will shape views on economic strength and the inflation path.
• Liquidity signals: Any subtle liquidity injections or balance-sheet adjustments can influence marginal risk-taking.
• Geopolitical risk: Trump’s twenty-six-point Ukraine proposal theoretically offers disinflationary benefits if resolved, as it could ease pressure on food, energy and shipping costs, but the demanding terms make near-term progress unlikely. A genuine breakthrough could ease headline inflation, giving central banks more flexibility to pivot dovish and sustain a more favorable global liquidity environment.

Regulatory Considerations

• MicroStrategy’s potential removal from MSCI Indices: MSCI is reassessing MicroStrategy’s eligibility because it increasingly resembles a Bitcoin fund rather than a traditional equity fund. Its exclusion would trigger mandatory selling from passive products that track MSCI indices. This would impose downward pressure on MSTR and increase volatility which can then spill over into Bitcoin through correlation, hedging flows, and deleveraging, even though the long-term impact on BTC fundamentals remains limited. A final decision is expected in January.
• Potential legislative actions: Proposals such as accepting Bitcoin for tax payments and allocating proceeds to strategic reserves introduces early but notable potential tailwinds. In addition, the CLARITY Act – now moving through Senate committees ahead of a potential floor vote in late 2025 or early 2026 – remains one of the most consequential regulatory efforts underway and could affect both Bitcoin and the broader market in tandem. Establishing a clear market-structure framework for digital assets would allow regulated financial institutions to participate directly in DeFi, potentially unlocking billions in institutional liquidity and accelerating the adoption of tokenized assets.

Crypto Market Structure and Positioning

• Key support levels: $81K and $85K are important technical support levels.

• ETF Buyer Cost Basis: Average entry for US spot ETF holders sits near $82K.
• MicroStrategy’s estimated $74K cost basis can shape sentiment during deeper pullbacks, but it’s mostly a psychological reference point, not a technical level that would meaningfully trigger liquidations.

Holder positioning and sentiment

• Break-even selling risk: Roughly 35% of BTC, 38% of ETH, and 70% of SOL ¹¹ holders are currently at a loss. When a large share of the market is underwater, investors often use rallies to reduce exposure, adding selling pressure that can limit the strength of recoveries.

Understanding what this means for the future

After a month of expectation resets, the crypto market's next major move hinges on the evolution of macro conditions. As Bitcoin remains closely tied to global liquidity and rate expectations, the trajectory of yields and Fed communication are the primary swing factors. If financial conditions ease into 2026, the current combination of flushed leverage, healthier positioning, and resilient onchain activity creates a strong setup for recovery. 

Footnotes: 

1. 21Shares, “The two eras of Bitcoin valuation: pre- and post-ETFs.” https://www.21shares.com/en-row/research/the-two-eras-of-bitcoin-valuation-pre--and-post--etfs
2. Reuters, “OpenAI discussed government loan guarantees for chip plants, not data centers, Altman says.” https://www.reuters.com/business/openai-doe
3. Coinglass, “Long/Short Ratio dashboard.” https://www.coinglass.com/LongShortRatio
4. Glassnode, “US Spot ETF flows (institutions) chart - Bitcoin.” https://studio.glassnode.com/charts/institutions.UsSpotEtfFlowsNet?a=BTC&c=usd&category=
5. FT Portfolios, “Asset Flows Monitor — November 2025 edition.” https://www.ftportfolios.com/Commentary/Insights/2025/11/10/asset-flows-monitor-november-2025-edition
6. Alternative.me, “Crypto Fear & Greed Index.” https://alternative.me/crypto/fear-and-greed-index/
7. Yahoo Finance, “Fed members strongly differ on December rate outlook.” https://finance.yahoo.com/news/fed-members-strongly-differ-december-193724594.html
8. Yahoo Finance, “Nvidia Q3 earnings trounce expectations.” https://finance.yahoo.com/news/nvidia-q3-earnings-trounced-expectations-183033084.html#:~:text=Quick%20Read,over%2Dyear%20to%20%2451.2B.
9. The White House, “Launching the GENESIS Mission -  presidential action, Nov 2025.” https://www.whitehouse.gov/presidential-actions/2025/11/launching-the-genesis-mission/
10. DeFiLlama, “DeFiLlama revenue dashboard.” https://defillama.com/revenue
11. Glassnode, “Relative profit supply chart - SOL.” https://studio.glassnode.com/charts/supply.ProfitRelative?a=SOL&s=1636130670&u=1764028800&zoom=

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