Year-end liquidity dries up, Bitcoin awaits Fed guidance in a key range

Over the weekend, Bitcoin saw wild swings between $88,000 and $92,000, while Ethereum surged directly from $2,910 to $3,150. As we approach the end of the year, liquidity is drying up, so even minor capital inflows or outflows can make the market look extremely volatile.

Interestingly, despite the sharp price movements, the liquidation data isn’t as brutal as one might expect. Looking deeper, both overall participation and leveraged positions have been steadily shrinking this quarter—open interest in perpetual contracts for the two major coins has dropped 40-50% from the October highs, and retail sentiment has basically returned to the quiet, bearish levels of a crypto winter.

But there are clear changes on the supply side. Over the past two weeks, about 25,000 Bitcoins have been withdrawn from exchanges, and for the first time in history, ETF and institutional holdings have surpassed exchange reserves. Ethereum balances on exchanges have also hit their lowest level in nearly a decade. Retail investors are exiting, while long-term capital is quietly accumulating.

Now, everyone’s attention is on this Wednesday’s Federal Reserve meeting. A 25 basis point rate cut is almost certain; the key is what they say about the balance sheet, which will directly determine how risk assets perform at year-end. Bitcoin is still ranging between $84,000 and $100,000, market depth is getting thinner, and with another holiday coming up, any breakout in either direction could trigger a major move.