The price movement of Bitcoin is gradually approaching the Federal Reserve’s last policy decision of the year, exhibiting minimal outward volatility. However, the underlying market dynamics tell a markedly different story.
What seems like a stable range masks a phase of intense stress, with on-chain data revealing that investors are incurring nearly $500 million in daily losses, leverage has significantly decreased across futures markets, and approximately 6.5 million BTC are currently held at an unrealized loss.
These circumstances reflect the later phases of previous market downturns rather than a peaceful consolidation.
A structural reset occurring beneath an unchanging surface is not uncommon for Bitcoin, but the timing is particularly noteworthy.
The internal capitulation coincides with an external turning point in US monetary policy. The Fed has concluded the most aggressive phase of balance sheet reduction seen in over a decade, and the markets are looking to the December meeting for clearer indications of a shift toward rebuilding reserves.
Given this context, the convergence of on-chain stress and an upcoming liquidity transition sets the stage for this week’s macro events.
The liquidity pivot
As reported by the Financial Times, Quantitative Tightening officially concluded on December 1, marking the end of a period during which the Federal Reserve slashed its balance sheet by about $2.4 trillion.
Consequently, bank reserves have dwindled to levels historically linked with funding strain, and the Secured Overnight Financing Rate (SOFR) has periodically tested the upper limits of the policy corridor.
These developments indicate a system no longer flush with liquidity, but rather edging towards a scenario where reserve scarcity becomes a significant concern.
In this context, the most crucial signal from the FOMC will not be the widely anticipated 25-basis-point rate cut but the strategy regarding its balance sheet.
The Fed is likely to detail, either clearly or through its implementation notes, how it plans to transition to Reserve Management Purchases (RMP).
According to Evercore ISI, this program could initiate as soon as January 2026 and involve approximately $35 billion per month in Treasury bill purchases as proceeds from mortgage-backed securities are reinvested into shorter-duration assets.
The specifics are critical. While the Fed might not frame RMP as a stimulus, reinvesting into bills steadily works to rebuild reserves and shortens the maturity profile of the System Open Market Account.
This operation gradually enhances reserves, leading to an annualized balance sheet increase exceeding $400 billion.
This transition would signal the first sustained expansionary push since QT began. Historically, Bitcoin has closely tracked these liquidity cycles more than changes in policy rates.
Meanwhile, broader monetary aggregates suggest that the liquidity cycle might already be shifting.
Significantly, the M2 money supply has reached an all-time high of $22.3 trillion, exceeding its early-2022 peak following an extended contraction.
If the Fed confirms that reserve rebuilding is starting, Bitcoin’s sensitivity to balance sheet dynamics could swiftly regain importance.
The macro trap
The reasoning for this pivot stems from the labor data.
Nonfarm payrolls have decreased in five of the last seven months, and the slowdown in job openings, hiring rates, and voluntary quits has shifted the employment narrative from one of resilience to one of fragility.
The “soft landing” narrative becomes increasingly difficult to support as these indicators show signs of cooling, constricting the Fed’s policy options.
Although inflation has moderated, it remains above the target, and the cost of a prolonged tight policy is rising.
The risk is that labor market weaknesses could worsen before disinflation is fully achieved. Therefore, this week’s press conference may prove to be more informative than the rate decision itself.
Markets will pay close attention to how Powell navigates the need to maintain labor market stability while safeguarding the credibility of the inflation trajectory. His remarks on reserve adequacy, balance sheet strategy, and the timing of RMP will shape expectations for 2026.
For Bitcoin, this introduces a range of conditional outcomes rather than a binary situation.
If Powell acknowledges softness in the labor market and clarifies the reserve rebuilding process, the market is likely to view the current price range as misaligned with the anticipated direction of policy. A breakout through the $92,000–$93,500 range would signal traders positioning for a liquidity increase.
Conversely, if Powell stresses caution or postpones clarity on RMP, Bitcoin may remain within or revert to the lower consolidation band between $82,000 and $75,000, where ETF bases, corporate treasury limits, and historical zones of structural demand converge.
Bitcoin capitulation?
At the same time, Bitcoin’s internal market dynamics bolster the perception that the leading digital asset has been in a state of reset beneath the surface.
Short-term holders are continuing to sell coins during weaker market conditions, and mining economics have deteriorated as production costs approach $74,000.
In addition, mining difficulty recorded its most significant drop since July 2025, indicating that marginal operators are scaling down or ceasing operations.
Yet these signs of stress coexist with early indications of tightening supply.
BRN Research informed CryptoSlate that large wallets have amassed around 45,000 BTC in the past week, exchange balances are trending lower, and stablecoin inflows suggest that capital is poised to re-enter if conditions improve.
Moreover, Bitwise’s supply metrics indicate accumulation across wallet cohorts, even as retail sentiment shows “extreme fear.” Coins are being moved away from liquid markets to long-term custody, reducing the share of supply available for further selling.
This pattern—a blend of forced distribution, miner pressure, and selective accumulation—typically lays the groundwork for a resilient market floor.
Bitwise added:
“Capital inflows into Bitcoin continue to decline, with 30-day Realised Cap growth slowing to just +0.75% per month. This indicates that profit-taking and loss-taking are now broadly balanced, with losses only slightly outweighing gains. This rough equilibrium suggests the market has reached a state of rest, with neither side exerting significant control.”
The technical verdict
From a market structure standpoint, Bitcoin is currently constrained between two key zones.
A consistent break above $93,500 would propel the asset into a region where momentum models are likely to activate, with subsequent levels at $100,000, the $103,100 short-term holder cost basis, and the longer-term moving averages.
Conversely, failure to overcome resistance in light of a cautious message from the Fed could draw the market back toward the $82,000–$75,000 range, which has historically acted as a reservoir of structural demand.
BRN noted that cross-asset performance reflects this sensitivity. Gold and Bitcoin have traded inversely leading up to the meeting, mirroring rotations driven by shifting liquidity expectations rather than just risk sentiment.
Thus, if Powell’s comments reinforce that reserve rebuilding is the next stage of the policy cycle, flows are expected to quickly reorient toward assets that positively respond to expanding liquidity conditions.
