Bitcoin surges near $94,000 bubble; is the market entering a stabilization phase?

Author: Techub Hotspot Express

Written by: Glendon, Techub News

Today, Bitcoin broke through the key resistance level of $93,000 again, reaching a high of $93,958.58. Looking back to December 1st, the crypto market experienced a general decline, with Bitcoin falling below $84,000. However, in less than two days, Bitcoin rebounded strongly, with gains approaching 12% at one point. At the same time, the cryptocurrency fear and greed index also showed significant easing, rising to 28 today, indicating that market sentiment has shifted from "extreme fear" back to "fear." Coupled with several positive data points, does this mean that the crypto market has successfully curbed the sharp decline and completed its bottoming process? What positive and negative factors currently exist in the industry?

Signals of Stabilization Emerge in the Crypto Market

Based on multiple analyses and data, while it cannot yet be definitively stated that the crypto market has completely escaped the "bear market," it is clear that the crypto market is entering a phase of stabilization and awaiting recovery.

Bitfinex Alpha pointed out in its latest report that, from a time perspective, the crypto market had previously approached a local bottom. Given the extreme deleveraging, panic selling by short-term holders, and signs of gradually exhausting selling pressure, the market has met the conditions for entering a stabilization phase.

Meanwhile, on-chain data metrics also corroborate this assessment. The "Adjusted Spent Output Profit Ratio" has fallen below 1 for the third time since the beginning of 2024, which is highly consistent with the loss realization dynamics observed at previous cycle lows in August 2024 and April 2025. Furthermore, the "Entity Adjusted Realized Losses" metric has surged to $403.4 million per day, exceeding the scale of losses measured by this metric at previous major lows. Typically, a sharp rise in this metric indicates that panic selling is nearing its end, and the market is unlikely to experience a new, deeper decline. In the derivatives sector, total open interest (OI) for Bitcoin futures fell to $59.17 billion, a significant drop from its peak of $94.12 billion, indicating that leveraged funds have been systematically cleared. Bitfinex Alpha believes that the continued contraction in open interest coupled with an upward trend in spot prices suggests that the market is actually experiencing short covering rather than a new round of speculative risk-taking. This phenomenon further demonstrates that the market is moving towards a more stable consolidation phase, with reduced market vulnerability, and is expected to lay the foundation for a sustained recovery in the fourth quarter. Furthermore, Bitcoin exhibits a noteworthy phenomenon: its price previously fell by approximately 31% from its all-time high of $126,000, falling below its network value for the first time in two years. According to Metcalfe's Law, Bitcoin's price is positively correlated with the growth of active addresses and transaction volume (i.e., network value); that is, the more wallets and transactions there are, the higher its fair value. This divergence between price and network value indicates that Bitcoin is undervalued relative to its expanding network, a situation that typically occurs after excessive market speculation. Economist Timothy Peterson believes that while this doesn't necessarily mean Bitcoin's price has bottomed out, it at least indicates that most of the leverage has been cleared and the "bubble" has burst. Historically, this has often been a signal of an impending Bitcoin recovery. The recent price rebound is driven by several factors, with rising expectations of a Federal Reserve rate cut being a significant one. FOMC member John C. Williams recently stated explicitly that monetary policy remains tight; and Bank of America Global Research directly predicts a 25 basis point rate cut this month, a shift from their previous forecast of no cut. This change in prediction has further boosted market expectations for a rate cut this month. As of writing, according to CME's "FedWatch" data, the probability of the Federal Reserve cutting interest rates by 25 basis points in December has gradually climbed to 89.1%; on Polymarket, the market's bet on the probability of a Fed rate cut in December has increased by 5% to 93%, and the total trading volume of this prediction market has also risen to approximately $224 million. In addition to the macroeconomic impact, progress in US cryptocurrency legislation is also continuing. On December 2nd, Travis Hill, acting chairman of the Federal Deposit Insurance Corporation (FDIC), revealed at a congressional hearing that the FDIC will release its first draft implementation of the GENIUS Act this month, which outlines the federal regulatory application process for stablecoin issuance, and plans to propose subsequent regulatory provisions such as capital and liquidity requirements early next year. Furthermore, the FDIC is developing regulatory guidelines for tokenized deposits. SEC Chairman Paul S. Atkins has explicitly stated that the "innovation exemption" for cryptocurrency companies, which he has highlighted, will officially take effect in January next year. Driven by both favorable policies and market expectations, Wall Street institutional investors continue to exert their influence. Data from CoinShares' latest weekly report shows that digital asset investment products saw a total inflow of $1.06 billion last week, ending four consecutive weeks of outflows (cumulative outflows of $5.47 billion). Specifically, Bitcoin, Ethereum, and XRP investment products saw net inflows of $461 million, $308 million, and $289 million respectively, with XRP setting a new record for its largest single-week inflow. Meanwhile, all major crypto ETFs saw net inflows over the past week. According to SoSoValue data, US Bitcoin spot ETFs saw a net inflow of $70.05 million last week, ending four consecutive weeks of net outflows; US Ethereum spot ETFs saw a net inflow of $313 million, ending three consecutive weeks of net outflows; US Solana spot ETFs saw a net inflow of $108 million, marking five consecutive weeks of net inflows; and US XRP spot ETFs saw a net inflow of $157 million, also marking four consecutive weeks of net inflows. A key positive development recently strengthening institutional investment momentum is that Texas launched its Bitcoin reserve program and completed its first allocation, purchasing approximately $5 million worth of BlackRock's Bitcoin spot ETF (IBIT) last week. Although the allocation is not large, this move is significant, marking the beginning of a new phase for Texas to hold its own Bitcoin once the infrastructure is ready. BlackRock's head of business development has also revealed that Bitcoin ETFs have become the company's most profitable product line, with asset allocation approaching $100 billion. Since its launch in January 2024, its spot Bitcoin ETF, IBIT, reached $70 billion in assets in just 341 days and currently holds over 3% of the circulating supply of Bitcoin. Interestingly, during the recent market downturn, crypto companies have shown a different performance than in previous cyclical declines, demonstrating continued strong growth and actively adjusting their business models to explore new revenue streams. For example, Kraken plans to acquire tokenized asset platform Backed Finance, focusing on long-term investment; Binance launched "Binance Junior," a digital financial education platform for teenagers, and its self-custodied cryptocurrency wallet, Trust Wallet, launched a prediction market; Circle established a foundation, with seed funding provided by Circle's "1% Pledge" equity donation program; and Coinbase is continuously expanding its product line, token offerings, and emerging consumer applications. Analysts at research and brokerage firm Bernstein point out that the overall performance of the crypto industry is in stark contrast to market prices, and the ongoing business model reforms and favorable regulatory factors are strong evidence of the industry's inherent resilience. This indicates that the industry is entering a new phase, with companies beginning to implement strategies previously limited by regulatory uncertainty, and their business scope no longer confined to cyclical trading revenue. The actions of the aforementioned Wall Street institutions and crypto companies may stem from the industry's optimistic outlook on the long-term prospects of the crypto market. Grayscale explicitly stated that Bitcoin is unlikely to fall into a deep cyclical downturn, and its price is expected to reach a new high next year. Grayscale analysts pointed out that unlike previous bull markets, this cycle has not seen the parabolic rise commonly seen before a major reversal; moreover, the current market structure is also very different from the past, with institutional funds mainly concentrated in exchange-traded products (ETPs) and digital asset reserves (DATs), rather than retail trading activities on spot exchanges. Based on these factors, the industry generally expects the crypto market to usher in a new round of upward movement early next year. However, at present, there are still some uncertainties in the crypto market in the short term. A confluence of short-term negative factors may lead to continued market volatility. On-chain data shows that the pace of accumulation by long-term holders and large wallets has slowed significantly in recent weeks, particularly during Bitcoin's drop below $84,000 on December 1st. In stark contrast, smaller wallets accelerated their buying during the price decline. Timothy Misir, Head of Research at BRN, analyzes this phenomenon, suggesting the market structure is at a delicate stage, with this divergence already evident. The slowdown in buying by whales, coupled with continued accumulation by retail wallets, is a typical late-cycle pattern that exacerbates short-term market fragility. The recent sell-off is a typical liquidity and position adjustment event; the market is not actually signaling a trend reversal, but rather releasing pressure signals. He emphasizes that exchange balances and stablecoin inflows indicate both purchasing power and potential selling liquidity in the market. Furthermore, the uncertainty surrounding Federal Reserve policy remains a sword of Damocles hanging over the crypto market. Despite market expectations that the Federal Reserve might cut interest rates this month, the positive impact of such expectations has already been partially priced into the cryptocurrency market, as evidenced by the recent price rebound. Even if the Fed does cut rates, it typically takes several months for liquidity to seep into the cryptocurrency market, making it difficult to quickly drive up Bitcoin prices in the short term. Moreover, a Fed rate cut is not a certainty; if this expectation fails to materialize, the impact on the market could be even more severe. The recent decline in the cryptocurrency market is widely believed to be closely related to a series of negative events in Asia. Among these, signals of tightening monetary policy in Japan have exacerbated market anxiety, with the yield on 2-year Japanese government bonds breaking through 1% for the first time since 2008. Coupled with rising expectations of a Bank of Japan rate hike, this has prompted investors to reassess the consistency of major central banks' easing strategies. Against this backdrop, even a Fed rate cut is unlikely to offset the negative impact of tightening expectations in other economies. Furthermore, the liquidity situation is not optimistic. While there has been some inflow of funds into cryptocurrency investment products and related ETFs since last week, the overall liquidity remains weak compared to several months ago, failing to support the view that institutional funds are flowing back in large quantities. Worse still, most altcoins are currently mired in a liquidity crunch. Ki Young Ju, founder and CEO of CryptoQuant, tweeted that projects that can access new liquidity channels such as DAT (Digital Asset Reserve) and ETFs are more likely to survive in the long term. Conversely, if an altcoin fails to participate in this liquidity competition, its long-term risk is likely to be high. So, do these negative factors mean that the crypto market will continue to decline, or even experience a further crash? Not necessarily. Currently, Bitcoin is building strong support in the $80,000 range. Glassnode states that a new cost base has formed above $80,000 for Bitcoin, indicating new capital accumulation at these price levels. This area has now become one of the most densely packed bands on the heatmap, and recent buyers are likely to "hold their ground" here. It's worth noting that Ethereum is also approaching a crucial upgrade milestone. The Ethereum Foundation plans to activate the Fusaka upgrade on December 4th to achieve scaling. Shortly before, Ethereum's block gas limit was significantly increased from 45 million to 60 million, improving network transaction capacity. The Ethereum mainnet also set a record for highest throughput in November, with its ecosystem network peak TPS (transactions per second) reaching a new high of 32,950. These developments in Ethereum may also have a positive impact on the overall crypto market. In summary, the current crypto market is in a news-driven, range-bound trading phase. Bitcoin is unlikely to break through the key resistance level of $98,000 in the short term, but it's also unlikely to fall below the support level of $80,000. Based on current data and trend analysis, the crypto market is gradually entering a stabilization phase. Barring any major negative events, Bitcoin may consolidate around $90,000, or it may slowly break out upwards. Thanks to the industry's highly optimistic outlook on the long-term positive prospects of the crypto market, the possibility of the market entering a true "bear market" cycle is likely quite low.