Written by: Oluwapelumi Adejumo
Compiled by: Saoirse, Foresight News
Bitcoin's price movement is fluctuating alongside the Fed's final policy decision of the year, showing almost no significant surface-level changes, yet the deep market structure presents a completely different picture.
Beneath the seemingly stable price range lies a period of concentrated pressure: on-chain data shows investors are facing daily losses nearing $500 million, leverage in the futures market has significantly decreased, and nearly 6.5 million Bitcoin are currently in an unrealized loss position.
Bitcoin Realized Loss Level, Source: Glassnode
This situation resembles the final stages of past market contractions more than a healthy consolidation phase.
However, structural adjustments occurring beneath a calm surface are not uncommon for Bitcoin, but the timing of this adjustment is noteworthy.
The internal market "capitulation selling"恰好 coincides with an external inflection point in US monetary policy. The Federal Reserve has ended its most aggressive balance sheet reduction phase in over a decade, and the market expects its December meeting to outline a clearer framework for a "turn towards reserve rebuilding."
Given this, the on-chain market pressure and the pending liquidity shift together form the backdrop for this week's macro events.
Liquidity Shift
According to the Financial Times, Quantitative Tightening (QT) officially ended on December 1st. During this period, the Fed reduced its balance sheet by approximately $2.4 trillion.
This move pushed bank reserve levels down into a range historically associated with funding stress, while the Secured Overnight Financing Rate (SOFR) repeatedly tested the upper limit of the policy rate band.
These changes indicate that the market system is no longer flush with liquidity but is gradually entering a phase of "concern triggered by scarce reserves."
Against this backdrop, the most critical signal from the Federal Open Market Committee (FOMC) is not the widely anticipated 25 basis point rate cut, but rather the direction of its balance sheet strategy.
The market expects the Fed to clarify its transition plan to "Reserve Management Purchases (RMP)" through an explicit statement or policy implementation document.
According to analysis by investment research firm Evercore ISI, this plan could launch as early as January 2026, involving monthly around $35 billion in purchases of short-term Treasury bills — funds recouped from maturing mortgage-backed securities will be reallocated into short-term assets.
The details of this mechanism are crucial: although the Fed is unlikely to define RMP as "stimulus policy," continuous reinvestment into short-term Treasury bills will steadily rebuild bank reserves and shorten the asset maturity structure of the System Open Market Account (SOMA).
This operation will gradually increase the scale of reserves, ultimately leading to an annualized balance sheet growth exceeding $400 billion.
Such a shift would mark the first sustained expansionary policy signal from the Fed since the start of quantitative tightening. Historical data suggests Bitcoin's sensitivity to these types of liquidity cycles is far greater than its sensitivity to changes in policy rates.
Meanwhile, broader monetary aggregate data indicates that the liquidity cycle may have already begun to turn.
Notably, the M2 money supply has reached a historical peak of $22.3 trillion, surpassing the high of early 2022 after a prolonged period of contraction.
(Note: M2 is a core measure of money supply, falling under the "broad money" category. It has a wider scope than base money (M0) and narrow money (M1), providing a more comprehensive reflection of the overall liquidity situation in society.)
US M2 Money Supply, Source: Coinbase
Therefore, if the Fed confirms the start of "reserve rebuilding," Bitcoin's sensitivity to balance sheet dynamics could quickly rebound.
Macro Trap
The core rationale for this policy shift stems from changes in employment data.
Nonfarm payrolls have declined in 5 out of the past 7 months; simultaneously, job openings, the hiring rate, and the quits rate have all shown signs of slowing, shifting the employment market narrative from "highly resilient" to "fragile and under pressure."
As these indicators cool, the theoretical framework of an "economic soft landing" becomes increasingly difficult to sustain, and the Fed's policy options continue to narrow.
While current inflation has receded, it remains above the policy target; meanwhile, the cost of "maintaining restrictive policy for longer" is rising.
The potential risk is that weakness in the labor market could intensify further before inflation fully returns to target levels. Therefore, the informational value of the Fed press conference this week might exceed that of the rate decision itself.
The market will focus intently on how Fed Chair Powell balances the dual objectives — maintaining labor market stability while ensuring credibility in the inflation path. His remarks on "reserve adequacy," "balance sheet strategy," and the "timing of RMP launch" will dominate market expectations for 2026.
For Bitcoin, this means its price movement won't be a binary outcome of simply rising or falling, but will depend on the specific direction of the policy signals.
If Powell acknowledges labor market weakness and clearly outlines the reserve rebuilding plan, the market might perceive the current range-bound price as disconnected from the policy direction — a break above the $92k - $93.5k range would indicate traders are anticipating liquidity expansion.
Conversely, if Powell emphasizes policy caution or delays clarifying RMP details, Bitcoin could remain within the lower consolidation range of $82k - $75k — a zone that concentrates ETF holding bottoms, corporate treasury reserve thresholds, and historical structural demand areas.
Will Bitcoin See 'Capitulation Selling'?
Meanwhile, Bitcoin's internal market dynamics further corroborate the view that "the asset is undergoing a reset beneath the surface."
Short-term holders continue to sell tokens during market weakness; as mining costs approach $74k, mining economics have significantly deteriorated.
Simultaneously, Bitcoin mining difficulty saw its largest single drop since July 2025, indicating marginal miners are scaling back operations or shutting down rigs entirely.
However, these pressure signals coexist with early signs of "supply tightening."
Research firm BRN Research disclosed to CryptoSlate: large wallets have accumulated approximately 45,000 BTC over the past week; Bitcoin exchange balances continue to decline; stablecoin inflows show that capital is poised to re-enter the market should conditions improve.
Furthermore, supply metrics from asset manager Bitwise show that despite retail sentiment being in "extreme fear," wallets of all types are accumulating Bitcoin. Tokens are moving from high-liquidity platforms to long-term custody accounts, further reducing the proportion of supply available to absorb sell-offs.
This pattern of "forced selling, miner pressure, and selective accumulation" often forms the foundation for a long-term market bottom.
Bitwise further added:
"Bitcoin's capital expansion continues to contract, with the 30-day realized cap growth rate falling to just 0.75% per month. This suggests profit-taking and stop-loss selling in the current environment are roughly balanced, with losses only slightly outweighing profits. This rough balance indicates the market has entered a 'calm period,' with neither bulls nor bears holding clear dominance."
Technical Perspective
From a market structure perspective, Bitcoin remains constrained by two key ranges.
A sustained break above $93.5k would push the asset into a zone where "momentum models are more easily triggered," with subsequent targets at $100k, $103.1k (the short-term holder cost basis), and long-term moving averages.
Conversely, failure to break resistance in the face of cautious Fed signals could see the market retreat to the $82k - $75k range — an area that has repeatedly acted as a "reservoir" for structural demand.
BRN Research notes that cross-asset performance also confirms this sensitivity: ahead of the Fed meeting, gold and Bitcoin showed inverse correlations, reflecting asset rotation driven by changes in liquidity expectations, rather than purely risk sentiment-driven volatility.
Therefore, if Powell's comments reinforce the expectation that "reserve rebuilding is the core of the next policy phase," capital could quickly rotate towards assets that respond positively to "liquidity expansion."
