On December 16, 2025, the cryptocurrency market experienced a severe shock. According to data from CoinGlass and CoinDesk, the total futures liquidation amount exceeded 584 million USD in the last 24 hours (some platforms reported close to 592 million USD), involving over 180,000 traders, with long liquidations accounting for as much as 87%. This wave of liquidations directly caused Bitcoin to quickly drop from above 90,000 USD to the 85,000-86,000 USD range, a decline of about 4%; Ethereum fell more than 5%, while mainstream coins like Solana generally declined by 4-6%. The total market capitalization evaporated by about 120-150 billion USD, and the Fear and Greed Index plummeted to an extreme fear zone of 11-16. Many retail investors were panicked and questioned whether 'the bull market has ended.' But is this a major washout or the true beginning of a bear market?
First, let's clarify the essence of the liquidation data. This liquidation mainly occurred on platforms like Binance, Bybit, and Hyperliquid, where highly leveraged long positions were collectively forced to close. The trigger was the excessive crowding of leverage in the market: during Bitcoin's pullback from the November high of $126,000, many traders remained heavily long, betting on a quick rebound. As a result, in a thin liquidity environment, a small sell-off triggered a waterfall chain reaction, amplifying the decline. Historically, such long-dominated liquidation events are common during bull market corrections: during multiple yen arbitrage reversals in 2024, single-day liquidations exceeding $500 million were also observed, and ultimately the market continued to rise after clearing leverage. Although this liquidation is large in scale, Bitcoin did not break key support (such as $82,000), reflecting more of a 'leveraged bubble burst' rather than a trend reversal.
On a macro level, expectations of the Bank of Japan's interest rate hike are the core catalyst for this plunge. The Bank of Japan is almost certain to raise its policy interest rate from 0.5% to 0.75% at its meeting on December 18-19, which would be the highest level in 30 years, with nearly 100% probability priced in by the market. This will further compress the US-Japan interest rate differential, accelerating the reversal of yen carry trades: investors sell Bitcoin and other risk assets to repay debts in yen. Past experience shows that during the BOJ's rate hike cycle from 2024-2025, Bitcoin has experienced multiple pullbacks of 20-30%. This time, compounded by year-end tax sell-offs, institutional rebalancing, and the 6% decline in the DePIN sector, the wave of liquidations has been amplified. The fear and greed index has dropped to extreme fear, reflecting the extreme short-term emotions.
However, pessimism is not the whole picture. After the liquidation, the market showed clear oversold signals: indicators like RSI hit historical lows, similar to previous bottom characteristics. Institutional behavior indicates a contrarian layout—ARK Fund is heavily buying crypto-related stocks, and some giants continue to increase their Bitcoin holdings. The Federal Reserve's interest rate cut path in 2026 still provides liquidity support, and this rate hike has been highly priced in by the market, limiting the actual impact. Emerging narratives like RWA (e.g., JPMorgan's on-chain fund) inject confidence for the medium to long term. If the liquidation clears weak hands and reduces leverage, the market will be healthier, akin to 'building a bottom in fear.'
In summary, this liquidation of over $580 million is a classic shakeout rather than the onset of a bear market. It has wiped out excessive leverage and paved the way for a potential rebound. However, short-term risks remain: if the BOJ meeting is more hawkish, Bitcoin may test $80,000 or even lower support. It is recommended that investors reduce their positions and implement strict stop-losses to avoid emotional trading. For long-term players, this may be an opportunity to accumulate at lower levels. The crypto market is inherently volatile; rational analysis of data and attention to key price levels (such as the Bitcoin $85,000-$82,000 range) and the BOJ meeting results is essential. Panic often breeds opportunity; staying calm is key to coming out ahead!
