Christmas is approaching, but the cryptocurrency market is filled with chills. On December 24, 2025, the price of Bitcoin fell below the key support of $88,000. This is not an isolated case; historical data shows that a decline before Christmas is a high-probability event: out of the 15 Christmas cycles from 2010 to 2024, there were 11 instances of a decline in early to mid-December, with a decline probability of 73.3%. Why does a holiday that should be full of joy repeatedly become a 'day of disaster' for the market? Based on my years of observation, there are three main culprits at play: quarterly contract settlements, institutional fund repatriation, and human behavioral resonance.
Main culprit one: The 'liquidity black hole' of quarterly contract settlements. The proportion of leveraged trading in the cryptocurrency market has long remained above 60%. Quarterly contracts, as the most commonly used derivative tool by institutions, have a settlement cycle (usually the last Friday of December) that coincides with the Christmas period, forming the core engine of market volatility. In the 1-2 weeks before settlement, institutions will concentrate on 'rolling over' to avoid uncertainties during the Christmas holiday. A large number of simultaneous liquidations of old contracts can trigger a phase of concentrated selling. From December 1 to 20, 2025, the open interest of Bitcoin quarterly contracts dropped sharply from 20 billion USD to 15 billion USD, while spot trading volume also fell from 61 billion USD to 48 billion USD; this 'reducing positions without replenishing' behavior directly put pressure on prices. More dangerously, the chain liquidation of high-leverage positions saw Bitcoin drop only 2.3% on December 15, triggering nearly 200 million USD in liquidations, precisely because the market leverage ratio was high before settlement. Additionally, leading market makers like Jump Crypto and Jane Street significantly reduce liquidity supply before the holidays, leading to wider bid-ask spreads, worse market depth, and even small sell-offs can trigger large declines.
Main culprit two: The 'fund recovery curse' at the end of the year for institutions. As institutional funds occupy half of the cryptocurrency market (with spot ETF holdings reaching 175 billion USD), their year-end financial cycle coincides highly with the Christmas holiday, which dominates the pre-holiday market behavior. Western financial institutions generally use December 31 as the fiscal year-end, and the 2-3 weeks before Christmas are a critical period for locking in annual profits. For high-risk investments like cryptocurrency assets, institutions have a strong motivation to 'cash out for security.' The significant outflow of funds from Bitcoin ETFs of institutions like Fidelity and BlackRock in December 2025 is a clear evidence of this. At the same time, to avoid unexpected risks during long holidays, institutions defensively convert some cryptocurrency assets into fiat or stablecoins. The significant increase in the market value of USDT and USDC in the week before Christmas 2024 reflects this risk-averse behavior. When this defensive withdrawal coincides with the weakness of traditional risk assets (such as the decline of US stocks in December 2025), it further intensifies the 'double selling' pressure.
Main culprit three: The 'distraction of attention and risk aversion' caused by human behavioral resonance. Markets are made up of people, and human behavior undergoes significant changes during the Christmas period. Firstly, there is a 'seasonal distraction' of trading attention. Around Christmas, traders' attention shifts from the market to their families. Data shows that from December 20 to 30, 2023, the number of active Bitcoin addresses on-chain decreased by 33.3%, while the average daily transaction volume of Ethereum fell by 29.2%. The decline in participation leads to weakened buying power, where a small amount of selling can trigger significant volatility. Secondly, there is a 'year-end convergence' of risk preferences. Behavioral finance indicates that humans exhibit stronger risk aversion characteristics at year-end points, tending to lower risk exposure to protect annual profits. The fear and greed index in December 2025 remained in the 'extreme fear' range for a long time, reflecting this psychology. The mentality of individual investors to 'cash out for security during Christmas' resonates with institutional behavior, jointly driving prices down.
However, I believe that the Christmas 'disaster' is not an unbreakable fate. Exceptions in 2020 (unlimited QE by the Federal Reserve) and 2024 (interest rate cuts by the Federal Reserve and ETF expectations) indicate that when favorable macro-level forces are strong enough, they can completely offset the aforementioned negative factors. Therefore, the key still lies in the judgment of macro trends. Regarding the current market, I hold a cautious attitude. Under the combined influence of the three main culprits, especially when bearish patterns and death crosses appear in technical analysis, investors should maintain a defensive posture, preserve strength, and wait for capital to flow back and trends to clarify after the holidays.
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