December 2025 Market Commentary

The December Edition

After one of the weakest Octobers on record, BTC began November above $109,000 but ended the month below $92,000. Broader crypto markets followed suit, with ETH falling to $3,000 from $3,800. The crypto market’s decline was punctuated by two distinct waves of selling represented through BTC’s price actions: an initial 8% drop in the first week, followed by a prolonged 7% slide from Nov. 10-22 that brought BTC down to roughly $84,000.

Traditional markets moved in the same direction, though to a lesser degree. Global equities ended the month marginally in the black, up 0.1%. BTC’s 30-day correlation with equities remained elevated in the 0.6-0.7 range, while correlation with gold stayed weak but positive at roughly 0-0.1. This pattern reinforces the influence broader macro forces have had on crypto’s recent performance.

The selloff reflected intensifying macro headwinds: tightening global liquidity and slowing growth signals. The AI trade also faltered after disappointing PLTR earnings dragged the sector lower, while weakness among mega-cap tech names added to risk-off sentiment until the last week of the month. Meanwhile, the longest government shutdown in U.S. history constrained liquidity and delayed economic data releases, amplifying investor uncertainty as the VIX curve inverted for the first time since spring.

Galaxy’s Head of Firmwide Research, Alex Thorn, lowered his year-end bull case BTC forecast from $185,000 to $120,000, citing “heavy whale distribution, rotation into competing narratives including AI, gold, and stablecoins, and poor performance among BTC treasury companies.” He added that “the leverage wipeout on October 10 materially damaged bull market trends.”

Despite near-term volatility, BTC appears to be entering what we call its “maturity era,” characterized by growing institutional absorption, passive investment flows, and declining structural volatility. Although significant whale distribution, competing thematic trades, and weak treasury company performance have weighed on prices, the underlying investor base has evolved meaningfully.

U.S. spot bitcoin and ether ETFs faced sustained outflows in November, shedding more than $5 billion combined. It was the worst month on record for these vehicles, surpassing February’s losses. Still, year-to-date net inflows remain solid at ~$22 billion, underscoring the depth of institutional participation that has accumulated over 2025. Encouragingly, flow data in late November began to turn positive, suggesting that selling pressure may be abating as investors cautiously position for a potential year-end rebound.

001 Yet Another Barrier Falls for Banks and Crypto

After months of progress under the Trump administration, U.S. banking regulators took additional steps to shift from caution to acceptance and further lay the groundwork for banks to offer crypto services in a safe and sound manner.

In mid-November, the Federal Reserve announced new supervisory principles directing examiners to focus on real, quantifiable financial risks – like credit exposures, liquidity management, and governance – rather than excessive paperwork and procedural compliance. The memo overhauls the cumbersome matters requiring attention (MRA) and matters requiring immediate attention (MRIA) processes by requiring regulators to issue more specific findings and allowing banks’ own audit teams to verify resolution. It also loosens restrictions on liquidity management by instructing staff not to penalize banks for considering Federal Home Loan Bank (FHLB) capacity in their liquidity management. These reforms reduce regulatory friction and echo the Trump administration’s broader focus on deregulation, while streamlining the process, allowing banks and regulators to concentrate on managing substantive risks.

The same week, the Office of the Comptroller of the Currency (OCC) issued Interpretive Letter 1186, officially allowing national banks to hold crypto on their balance sheets for the purpose of paying blockchain transaction fees, or “gas.” While narrow in scope because it is limited to operational use rather than investment, this clarification enables banks to participate directly in blockchain networks, whether to process payments, test settlement infrastructure, or manage custody services. It is one of the clearest regulatory greenlights yet for banks to engage with crypto as part of their core operations rather than as an experiment.

The U.S. regulatory system is evolving from a defensive posture toward crypto to a more pragmatic, integration-focused stance. For decades, America’s largest banks have anchored the financial system through a comprehensive suite of products that stretch from deposits and consumer lending to payments, investment banking, asset management, and custody. Now, crypto and blockchain networks fall inside their operational perimeter. The OCC’s guidance could upgrade crypto from a peripheral curiosity into a functional component of the existing system, while the Fed’s risk-based supervision lowers the bureaucratic drag that has long constrained innovation inside regulated institutions.

As banks gain operational clarity, crypto becomes easier to incorporate into mainstream financial products. Institutional custody (as we forecasted in our 2025 Predictions), tokenized deposits, and onchain settlement networks are now within regulatory reach. For banks, this creates an opportunity to differentiate: competing on how effectively they can use blockchain to enhance and expand their offerings. For crypto-native firms, it introduces a new kind of competition from incumbents that now have both the permission and an incentive to enter.

The administration’s change in tone in regulating banks also closes the chapter on the so-called Operation Chokepoint 2.0, when crypto-related banking activity was discouraged through opaque supervisory pressure. The newly issued Debanking Report released by the House Financial Services Committee revealed that the FDIC under the prior administration sent 24+ secret pause letters to block banks from launching crypto offerings.

With the OCC, FDIC, and Fed now harmonizing around clearer rules and the CLARITY Act scheduled for a Dec. 8 Senate vote, the regulatory environment appears to be stabilizing in favor of inclusion.

002 Sovereigns Pilot Bitcoin Investments

BTC’s positioning as a potential store-of-value asset has prompted a growing number of national and local governments to explore legislation for bitcoin reserves. This trend was amplified during the 2024 U.S. presidential campaign in which Trump elevated a federal BTC reserve as a core policy proposal. Proponents generally argue that bitcoin’s fixed supply mirrors the traditional role of gold while offering operational advantages. For one thing, cryptographic keys are simpler and cheaper to store and secure than bars of gold.

The U.S. led recent developments by formalizing a Strategic Bitcoin Reserve in March, consolidating pre-existing government holdings rather than initiating net new purchases. The theme re-emerged in Europe in November as the Czech Republic and Luxembourg announced digital-asset allocations. The Czech National Bank, known for a comparatively modern reserve-management approach, created a $1m direct bitcoin portfolio, kept separate from its ~$140bn official reserves and framed as a pilot following earlier ECB criticism of integrating crypto into reserve assets. Luxembourg, by contrast, allocated roughly 1% of its €730m sovereign fund to regulated bitcoin ETFs, maintaining a high-quality fixed-income core while gaining controlled exposure to digital assets. Both institutions emphasized that small allocations allow for operational learning while containing volatility and downside risk.

In the U.S., Texas became the first state to establish a statutory bitcoin reserve, appropriating $10mn and initially gaining exposure through BlackRock’s IBIT ETF pending the development of direct-holding infrastructure. New Hampshire has also advanced a novel structure via its first bitcoin-backed municipal bond, targeting $100m in proceeds dedicated to acquiring and holding digital assets.

These initiatives illustrate rising public-sector engagement with BTC as a prospective strategic asset. The diversity of implementation from direct holdings to ETF exposure reflects differing regulatory and operational constraints as well as preferences. Importantly, allocations remain conservative (typically less than 1%), underscoring that these moves represent calculated pilot programs rather than speculative positioning.

003 Altcoin Spot ETFs Going Strong

Since the SEC’s generic listing approval in September and the altcoin spot ETF launches during October’s government shutdown, November brought yet another wave of new products: four additional spot Solana ETFs, four new XRP ETFs, and two DOGE ETFs. Despite the broader crypto market downturn, these altcoin ETFs attracted robust inflows.

Collectively, altcoin ETFs recorded $1.2 billion in net inflows for the month, even as BTC and ETH products saw combined outflows of roughly $5 billion. XRP led with $757 million, followed by SOL with $406 million. Notably, XRP ETFs surpassed Solana’s despite launching mid-month, though most of XRP’s inflows were concentrated on a single day across the four funds, reflecting strong initial enthusiasm. Meanwhile, Bitwise’s BSOL continued to dominate Solana’s flows.

The strong reception to these new altcoin ETFs underscores lingering investor demand for diversified crypto exposure, particularly among larger-cap names. However, we do not expect smaller altcoins to see comparable traction; even if demand emerges, their relatively modest market capitalizations mean flows are unlikely to have the same market impact as those for BTC or ETH.

004 Our Takeaways and Predictions

December brings a mix of optimism and unease. There are bullish catalysts on the horizon such as the CLARITY Act heading to a Senate vote on Dec. 8, typical mid-term market pumps, and several provisions from the One Big Beautiful Bill Act taking effect. The anticipated nomination of Kevin Hassett as Fed Chair has added some optimism, although less for immediate policy impact than for what it signals about a potentially looser, more growth-focused stance under the Trump administration. The rise in rate-cut odds, from about 70% in early November to 95% at the time of writing according to Bloomberg, has added to the market optimism.

Despite these positives, macro uncertainty remains high. The interplay of weaker growth signals, uneven risk appetite, and shifting fiscal priorities has kept conviction thin. Volatility has also picked up. BTC’s implied volatility is elevated and skewed toward downside protection.

At the same time, the AI trade has re-emerged, and that’s increasingly relevant for crypto. Renewed enthusiasm for innovation and tech risk could spill over into digital assets, lifting sentiment in correlated themes like blockchain infrastructure and AI payment models.

December is shaping up to be defined by bullish catalysts but fragile conviction. Crypto markets could swing sharply in either direction as the holiday season approaches.

Key Events to Watch:

• December 10: FOMC Rate Decision & Chairman Powell’s Speech

• December 11-13: Solana Breakpoint Conference

• December 19: Japan’s Rate Decision

Key Macroeconomic Data Releases:

• December 9: JOLTS Job Openings

• December 11: PPI, Jobless Claims

• December 16: NFP, Unemployment Rate, Flash Services PMI

• December 17: Retail Sales

• December 18: CPI, Jobless Claims

• December 19: Final GDP QoQ, Core PCE Price Index MoM

• December 23: Preliminary GDP QoQ

• December 24: Jobless Claims

• December 30: FOMC Minutes

• December 31: Jobless Claims

To learn more about the topics covered in this month's newsletter, contact our team or reach out to your Galaxy representative.

Crypto Performance & Volatility Data