The ongoing cycle is reaching a key inflection point.
From a technical angle, the market has been chopping sideways for weeks. Meanwhile, liquidity across derivatives has been building, meaning any aggressive move in either direction could trigger a sharp, volatile swing.
Bitcoin [BTC] is clearly front-running this setup. So far, BTC has been ranging around the $85k-level for five weeks. Historically, this type of chop tends to define BTC’s next move, often catching late Futures traders offside.
Against this backdrop, Bitcoin’s recent flush starts to matter.
For context, on 26 December, BTC dropped by 2.22% to $86k, wiping out nearly $3k in just 45 minutes as $70 million in long positions got liquidated. Naturally, it looked like BTC may have finally shown its hand.
And yet, the market reaction was contained.
Despite the drop, sentiment stayed in the “fear” zone, and total liquidations came in at just $189 million. Put simply, there wasn’t broad panic. This raises a key question – Is “conviction” in Bitcoin finally starting to show?
Bitcoin’s action sparks questions about HODLer confidence
Looking at on-chain data, it seems 2025’s FUD was probably needed though.
An analyst noted that roughly $154 billion in crypto positions have been liquidated so far this year. That’s a massive shake-up, in line with BTC’s 6.34% annual dip – A sign the market is clearly resetting positions.
The outcome? Bitcoin’s overheated derivatives have finally cooled off. In fact, Coinglass data highlighted BTC’s Open Interest (OI) dropping about $40 billion in Q4 alone. The same had a value of just $56 billion at press time.
Even so, conviction doesn’t seem to have cracked.
On the on-chain side, exchange data revealed that Bitcoin balances have continued to trend lower throughout 2025. More specifically, BTC held on exchanges fell by roughly 15% this year, with around 430,000 BTC withdrawn since April.
Against this backdrop, Bitcoin’s resilience doesn’t look random. Instead, the combination of falling exchange balances and cooling derivatives has helped stabilize price action, thereby limiting the risk of sudden swings.
In this context, Bitcoin’s recent volatility appears more aligned with short-term macro pressure than with any real loss of conviction among long-term holders. This potentially lays the groundwork for a bullish 2026.
Final Thoughts
- Bitcoin’s sharp drop triggered liquidations, but the move stayed contained – Signaling a leverage reset rather than panic selling.
- Cooling derivatives and falling exchange balances point to steady long-term holder conviction.
