November 2025 in Crypto: Fear and Uncertainty Abound

Q4 is historically the best quarter for digital asset prices. Over the past 12 years, Bitcoin – the cryptocurrency with the longest price history – averages a quarterly return of 77% and a median return of 47%, with a positive-to-negative return ratio of 8-to-4. If 2025 is to match historical averages though December will have to be stellar given that Q4 returns to date are currently -20%, after the price slide that began in October accelerated in November as evidenced by the 23% monthly decline in the value of our benchmark large cap Top10 Crypto CTI. This weakness was apparent from the get-go and it reflected a confluence of factors.

Fed Whiplash

With the US government’s record breaking 43-day shutdown delaying the publication of key US official data, most importantly, the jobs report, investors were left to fill the data void with private alternatives, like the monthly Challenger survey. It showed over 153,000 layoffs occurred in October, the highest reading for that month since 2003 with labour demand undermined by AI adoption, softening consumer and corporate spending, and rising costs. By reinforcing the view that the US labour market is losing momentum, and given the Fed cited softer hiring trends as the reason for cutting in September, investors were prepped for a third consecutive rate cut at the December 10 FOMC meeting.

However, comments by Chair Powell that such an outcome was far from assured, given persistent inflation concerns, and with the delayed September jobs report showing the US economy unexpectedly added 119,000 jobs (more than double consensus forecasts), investors quickly pivoted away from expecting a December rate cut. Amazingly though, days later the December rate cut was back in vogue after NY Fed Governor Williams acknowledged the increasing downside risks to employment, which, in his view, implies room for a near-term cut. Despite being only one of 12 FOMC voting members his comments saw the probability of a cut jump to more than 70%, a 40 point reversal!!!!!– see image.

Fed Rate Decision In December

Source: Polymarket

Such extreme volatility in market expectations about the next Fed decision is highly unusual. Over recent decades (since the Greenspan years really but embedded during the ZIRP years when forward rate guidance was one of the unorthodox policy tools they adopted) central banks have a preference for flagging policy changes well in advance in order to serve as a stabilizing not destabilizing force on financial markets. However, reflecting tension in their dual mandate, the FOMC is the most fractured we have seen in a very long time and the lack of consensus about the near-term path of the fed funds rate means it is practically impossible for them to provide such guidance. Hence, the jitters.

Moreover, when publishing the September jobs report the BLS announced that the October and November jobs reports will be published simultaneously on December 16. Critically, this is the week after the next FOMC meeting, meaning Fed officials will have to make their policy decision without timely official labour market data, which injects additional uncertainty and increases the probability of them making a policymaking error.

Overall, this created an uneasy backdrop for risk assets and crypto, resulting in a marked deterioration in investor sentiment as evidenced by the Fear and Greed Index dropping into “extreme fear” territory – its lowest level since July 2022, when the last crypto bear market was in full swing.

OG Selling

Adding to the negative tone were news reports and social media posts detailing that long-term Bitcoin holders —some inactive for more than a decade— sold in excess of 400,000 coins over the past month – see image. Since the timing of these sales aligns with the historical four-year Bitcoin cycle, which we discussed in the previous monthly update, it added to worries that the top may be in and that we have entered the early stages of a new bear market.

Revived Bitcoin Supply By Age (7+ years)

Source: charts.checkonchain.com

The worries stirred up by these OG Bitcoin sales, in my view, owes more to today’s febrile market sentiment than anything else. For one thing, it is important to put this selling into perspective. As can be seen on the chart below, which shows the age-distribution of all Bitcoin transactions, OG selling constitutes only a tiny fraction of market turnover. The majority of the Bitcoin transacted in 2025, over 2.8 million, have been held for less than two years.

Also, the number of coins that have been inactive for more than 7 years stands at around 5 million, which is 12X the number of Bitcoins sold this year, suggesting long-term holders remain convinced that the price of the seminal cryptocurrency still has considerable upside. (Admittedly, some of these old coins include those that cannot be sold because the owners have misplaced their private keys or the hard drives containing them).

Revived Bitcoin Supply By Age (All)

Source: charts.checkonchain.com

There is also the question of motive. Referring back to the first chart, the number of Bitcoin aged over seven years – see chart – sold this year closely matches the pace of selling in 2024. This was when the price of Bitcoin rallied from just over $40,000 to more than $100,000 amid all the excitement about the halving, which occurred in April 2024, and the explosive growth in spot Bitcoin ETFs launched a few months prior. At the time there was no serious discussion of an imminent bear market, so why the selling then, and now?

Life Changing Sums

Seven years ago the price of Bitcoin was hovering around the $6,000 mark, meaning anyone who owned Bitcoin from then is sitting on a 16X return – an exceptional financial performance. For Bitcoin held even longer, the gains would be an order of magnitude greater. In many instances, we are talking about life changing sums of money. Given drawdowns during bear markets have previously been as high as 80%, top slicing some of your holdings and securing your financial future “just in case”, is a prudent course of action even if one thought the bull market was still intact.

Such thinking accords with the perspective put forward by Jordi Visser. In a blog post published in early November, he suggested that long-term holder selling is akin to early investors cashing out during an equity IPO, an analogy that underscores a maturing crypto market, where wealth realization and broader investor participation mirror patterns long familiar in tradfi.

Not Unchartered Territory

Speaking of drawdowns, the drop from the October 6 high is just over 30%. A painful move no doubt for the bulls. Yet, it is worth recalling that such drops are not unprecedented in bull markets. In fact, as can be seen in the chart below, 25-30% drops are very common. Indeed, during the 2021 bull market, the price dropped around 50% before the uptrend reasserted itself and the price went on to hit a new all-time later that year. So, as unpleasant as the recent drop has been, we are certainly not in unchartered territory for Bitcoin.

Bitcoin Drawdowns (Peak to Trough)

NB: Blue indicates bull markets.

Source: Author calculations

Global Liquidity

Returning to the macro landscape, the primary reason why I believe we have not flipped over into a bear market is because the underlying backdrop remains favourable. Specifically global liquidity conditions remain expansive. This contrasts markedly what occurred during the 2022 bear market, when central banks aggressively tightened monetary policy after belatedly realizing that inflation was anything but transitory.

This positive relationship between global liquidity conditions and movements in digital asset prices has come in for a bit of a hammering lately because the apparent tight relationship between the price of Bitcoin and global M2 money supply (lagged by 12 weeks) that held over the past two years has broken down – see image.

Global M2 vs. Bitcoin Price

Source: Tradingview

For seasoned investors, though this decoupling comes as no surprise—such divergences happen all the time in tradfi markets. Expecting such a tight relationship to hold consistently enough to serve as a precise market-timing tool was always unrealistic. That said, this is very different from saying there is no relationship at all. When you zoom out and examine the longer-term behaviour of the two variables, it becomes clear that global liquidity does influence digital asset prices positively, just not with the precision suggested by the charts circulating among crypto investors over recent months – see image. Therefore, if global liquidity continues to rise, as discussed in the next section, the broader digital asset bull market should remain intact.

Zooming Out

Source: Tradingview

NOT QE QE

As mentioned above, the mixed signals coming from the Fed indicates uncertainty as to whether or not to proceed with its rate cutting cycle. Where there was consensus, however, was on concluding the QT programme on December 1. Moreover, a recent speech by New York Fed Chief John Williams suggests it may not be long before the Fed resumes balance sheet expanding operations. To be clear, the sort of balance sheet expansion the Fed is contemplating is unlike prior QE operations because the stated aim is not to directly provide additional monetary stimulus to the US, and by extension global, economy. Rather the goal of “non QE, QE” so to speak is to help the Fed keep control of short-term interest rates. To understand why this shift is on the cards we need to look at a little bit of financial plumbing.

QT In Action

Since 2022 the Fed has been actively reducing the size of its balance sheet, such that its holdings of securities dropped by more than $2 trillion to just over $6 trillion. This reduction drained liquidity from the financial system, tightening financial conditions in support of their monetary policy goal of bringing inflation back down towards the 2% target (and, as already stated, crypto suffered as a consequence).

Since mid -2023 onward one of the clearest indications of this drain is the drop in the usage of the Fed’s overnight reverse repo (ON RRP) facility. This facility, which was introduced in 2013, allows non-bank counterparties (like money market funds, GSEs, and primary dealers) to lend cash overnight to the Fed in exchange for Treasury collateral. In effect, it serves as a sponge for excess liquidity. This was especially useful when the Fed was conducting QE because it relaxed the relationship between the size of the Fed’s balance sheet and the amount of reserves in the banking system, and meant they retained the ability to keep interest rates within the target rate. (The ON RRP rate acts as an effective floor for the funds rate because it makes no economic sense to lend funds at an interest rate lower than you can get risk-free from the Fed). This facility also proved useful when the Fed flicked the monetary policy switch and transitioned to QT.

Zero In The Tank

Against a backdrop of sustained and sizable fiscal deficits, and with the Fed no longer the marginal buyer given its shift to balance sheet reducing QT, the private sector had to absorb the increase in the net supply of Treasuries. One key player that helped fill the gap is leveraged relative value (RV) funds who use repo financing to fund their Treasury purchases. Amid rising demand for repo financing by these RV funds, the balance on the ON RRP facility steadily declined as money market funds took advantage of the better rates of return offered by repo financing and Treasury bills relative to what they were getting from the Fed.

In 2023 over $2 trillion was parked in the ON RRP facility. Fast forward to today and the ON RPP balance has fallen to effectively zero. With this cheapest source of repo financing now exhausted other players, such as money market funds and commercial banks, stepped in to provide repo financing but only when repo rates had risen above the levels they could earn elsewhere. Hence, continued demand for repo financing necessary to absorb net Treasury issuance, generated upward pressure on short-term interest rates, pushing them up towards the upper end of the Fed’s target range – see image.

ON Reverse Repo Usage vs. SOFR-IORB Rate Differential

Source: Fred Database

In fact, such is the ongoing demand for repo financing that another Fed innovation, the Standing Repo Facility (SRF), has recently been tapped. Introduced in 2021 in response to the 2019 spike in repo rates, when QT went to far and the Fed were forced to step-in with emergency liquidity operations, the SFR allows primary dealers and banks to borrow reserves from the Fed overnight using Treasuries and other high-quality securities as collateral.

SFR Limitations

In theory, the SFR is the upper bound equivalent to the ON RRP facility, and seeks to cap interest rates at the top of the Fed’s target range. The problem though is only a limited set of commercial banks are eligible counterparties (40 in total). The other issue with the SFR is the perceived stigma that stems from the belief that its use signals financial weakness or distress to the market, in much the same way that there was a stigma associated with using the Fed discount window. Even though the Fed expects increased use of the SFR going forward, in his speech Williams noted that…

“the next step in our balance sheet strategy will be to assess when the level of reserves has reached ample. It will then be time to begin the process of gradual purchases of assets that will maintain an ample level of reserves as the Fed’s other liabilities grow and underlying demand for reserves increases over time. Such reserve management purchases will represent the natural next stage of the implementation of the FOMC’s ample reserves strategy and in no way represent a change in the underlying stance of monetary policy. [ED note: Meaning non QE QE]

Determining when we are at ample reserves is an inexact science. I am closely monitoring a variety of market indicators related to the fed funds market, repo market, and payments to help assess the state of reserve demand conditions. Based on recent sustained repo market pressures and other growing signs of reserves moving from abundant to ample, I expect that it will not be long¹ before we reach ample reserves.”

Fiscal Dominance

With such statements, Fed officials are presenting the switch from QT to “non QE” QE as simply a way of ensuring they remain in control of short-term interest rates, i.e. it is purely technical. Strictly speaking this is true, but one cannot escape the fact that the Fed are being forced into balance sheet expansion because of the Trump administration’s decision to continue to run sizable budget deficits. They are providing the means for the private sector to continue to absorb high net issuance of Treasuries, required to fund the budget deficit. If the Fed does not provide the means for this to occur, interest rate volatility picks up – potentially resulting in a replay of the 2019 repo crisis – undermining one of the key objectives of any central bank, namely maintaining financial stability.

In other words, the fiscal tail is wagging the monetary dog, providing further confirmation that we have entered a regime of fiscal dominance, a regime that is bullish for finite supply cryptocurrencies for reasons I outlined in a prior research note.

1 One reason why the implementation of non QE QE is unlikely to be immediate is because there is another liquidity source available, the US Treasury General Account (TGA), which is analogous to the US government’s checking account. The balance on the TGA has been steadily rising as part of a deliberate strategy by the US government to hold higher cash reserves given increased issuance of short-term Treasury bills, which means cash inflows and outflows are larger and more volatile, and following the debt ceiling standoff. However, the recent government shutdown, further increased the balance because of the pause in non-essential spending (furloughed worker salaries etc). With the US government now reopened, the TGA balance is expected to decline somewhat in the weeks and months ahead, a drawdown that injects liquidity into the banking system.