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As 2025 approaches its end, crypto traders are divided on whether the current drawdown signifies the onset of a new bear market or merely a late-cycle adjustment, shaped by quantitative easing, global interest rate reductions, and the implications of the U.S. CLARITY Act for 2026.
Summary
- Bitcoin has declined from crucial highs and breached significant support levels, with most major altcoins reflecting yearly losses; only privacy coins like Monero, Zcash, and BNB have shown positive performance.
- Macroeconomic factors, from U.S. and UK interest rate cuts to Japan’s rate hikes and increasing geopolitical risks, are affecting market sentiment, even as the expanding stablecoin supply indicates hidden liquidity.
- The Digital Asset Market CLARITY Act, which could alter the regulatory landscape by separating SEC and CFTC oversight and ending “regulation by enforcement,” is slated for Senate evaluation in early 2026.
As 2025 concludes, cryptocurrency traders and investors are questioning whether the digital asset market is facing a bear market, driven by falling prices and anticipated regulatory shifts and changes in monetary policy for 2026.
Following the recent U.S. Consumer Price Index data release and an interest rate cut from the Bank of England, Bitcoin has traded below its recent peaks. The combined market capitalization of cryptocurrencies fell close to the critical trillion-dollar mark before making a minor recovery, as indicated by market data.
Among the top 50 digital assets that have a complete year of price history, only privacy-focused tokens Zcash and Monero, as well as Binance’s BNB, achieved positive annual returns, according to price data. Bitcoin has experienced a decline year-to-date, along with several other major cryptocurrencies seeing significant losses during this timeframe.
In the last quarter of the year, Bitcoin (BTC) fell below a critical price point and has remained within a trading range beneath that level. This decline has broken through an essential support threshold, leading various market analysts to adopt a bearish outlook for the near term.
Market analyst Peter Brandt predicts a potential severe downturn in 2026, noting that each prior cryptocurrency bull run has yielded lower returns, while earlier parabolic trends have faced substantial corrections. He argued that the current upward trend has been compromised, forecasting that a drop from the all-time high could result in significantly lower price levels.
FED pivots on crypto
While both the United States and the United Kingdom have initiated interest rate cuts, the Bank of Japan has raised its rates to their highest in five years. These differing monetary policies have introduced uncertainty into global markets, potentially impacting the yen carry trade, a strategy involving borrowing yen at low rates to invest in higher-yielding foreign assets.
Market observers indicate that global economic uncertainties, ongoing conflicts such as in Ukraine, and rising tensions between the U.S. and Venezuela further influence sentiment within the cryptocurrency market.
According to market data, the stablecoin market capitalization has surged over the past year, indicating available liquidity in the cryptocurrency ecosystem.
The United States executed several interest rate cuts in 2025, with current market expectations suggesting another reduction is forthcoming, which aligns with the Federal Reserve’s quantitative easing policies. Historically, substantial quantitative easing measures, including those enacted during the COVID-19 pandemic, have coincided with cryptocurrency bull runs.
Industry figures, including Binance’s founder, have endorsed the idea of a potential supercycle, proposing that 2026 might signal the start of a new phase of quantitative easing. Some market observers contest that 2025 should not be framed as a bull market due to the prevailing quantitative tightening policies.
The White House has confirmed that the Senate will review the Digital Asset Market CLARITY Act as early as January, according to an official announcement. The legislation will go through committee stages, where it can be amended before further consideration on the Senate floor. Initial observations suggest the bill has a favorable chance of passing, according to political analysts.
The CLARITY Act seeks to establish clear distinctions between tokens deemed securities and those considered commodities, dividing regulatory authority between the SEC and the CFTC. If passed, this legislation would provide U.S. cryptocurrency firms with a clearer regulatory framework, replacing the current practice of “regulation by enforcement.”
