While traditional financial markets are enjoying a year-end rebound, Bitcoin has not only missed out on the "Christmas rally" but also experienced a rare flash crash on the Binance exchange. During the U.S. trading session on Wednesday evening, Bitcoin on the Binance BTC/USD1 trading pair suddenly plummeted from $87,600 to $24,100, a drop of over 70%, before rapidly rebounding to around $87,000 within seconds.
This extreme volatility was confined to the USD1 pair, a stablecoin issued by the Trump family-backed World Liberty Financial, and was not observed on other major trading pairs. Bitcoin's price is currently hovering around $87,000, trapped in a range between $85,000 and $90,000, with a year-to-date decline exceeding 7%. Since retreating from its all-time high in October, Bitcoin has fallen approximately 30% and is on track for its worst quarterly performance since the collapse of TerraUSD and Three Arrows Capital in the second quarter of 2022. This asset, known for its high volatility and speculative sentiment, has unexpectedly stalled at year-end, standing in stark contrast to the S&P 500 and gold, which are repeatedly hitting new highs.
Analysts point out that such "flash candle wicks" are typically triggered by insufficient liquidity or display issues. Emerging or low-volume stablecoin trading pairs often lack market makers providing dense quotes, resulting in shallow order book depth. A large market sell order, a forced liquidation, or automated trading can quickly exhaust the buy-side liquidity, causing the price to briefly deviate from true market levels. Cryptonews, a cryptocurrency analyst and co-founder of Coin Bureau, stated:
This highlights the risks of executing operations on illiquid trading pairs, especially when the stablecoin trading route is still in its liquidity-building phase. Many spot investors found their positions largely unaffected before and after the flash crash.
He believes that, against a backdrop of uncertain geopolitical conditions and fluctuating market liquidity, this serves as a warning against excessive leverage. Temporary pricing issues caused by widening spreads, faulty market maker quotes, or trading bots reacting to anomalous quotes can also trigger such price dislocations. During low-volume trading periods, this effect is amplified as fewer participants are available to absorb the order flow and restore price equilibrium.
Bitcoin's sluggish performance stands in sharp contrast to the distinctly different signals being released by traditional markets. U.S. stocks are experiencing a typical "Santa Claus rally," with the S&P 500 closing at a record high of 6,921.42 on December 24th, as tech stocks and momentum trading once again rewarded retail investors who held their positions. Gold is also performing strongly, with the spot price reaching a historic high of $4,525.18 per ounce on December 24th. Although it has since retreated, its annual gain remains over 70%, positioning it for its best annual performance since 1979 and the second-strongest annual gain in over a century. (Spot gold is up over 70% year-to-date) Bitcoin, however, is missing out on both fronts. For a period in early 2025, Bitcoin's movements were highly synchronized with risk assets, but it has clearly lagged behind in the year-end rally. Furthermore, its long-touted "digital gold" attribute has failed to attract the defensive capital inflows that are driving gold prices higher. Timothy Misir, Head of Research at digital asset research firm BRN, stated:
"Hard assets" are attracting funds as long-term hedges, while crypto assets remain marginalized.
Historical data shows that Bitcoin's performance during the "Santa Claus rally" has been inconsistent. While it posted gains of 33% and 46% during the Christmas-to-New-Year period in 2011 and 2016, respectively, it fell 14% and 10% in 2014 and 2021, respectively. Since 2011, Bitcoin's average gain during the Christmas period is 7.9%.
Some of the market inertia stems from technical factors. Bitcoin has broken below its 365-day moving average, around $102,000, a level that has acted as key support during this cycle. Failure to reclaim this threshold increases the risk of a deeper correction. The expiration of over $23 billion in options on December 26th has frozen directional bets, reinforcing the stalemate. Thin holiday liquidity has further dampened market activity. Yet these factors merely highlight a deeper issue: a lack of clear buyers willing to step in. Persistent selling by long-term holders constitutes another drag. Pratik Kala, Portfolio Manager at hedge fund Apollo Crypto, stated that Bitcoin's price action this year has been "noticeably disconnected from the extremely bullish news cycle surrounding the asset." He attributes this divergence to continued selling by early holders, including the sharp pullback in October, which collectively prevented the rally from gaining momentum. Kala suggested that much of the selling pressure now appears to have subsided, leaving Bitcoin in a consolidation range, which he believes could lay the groundwork for a stronger performance next year.
As traders entered the Christmas holiday, market liquidity declined and risk appetite waned, leading to further outflows from spot Bitcoin and Ethereum ETFs on December 24th. According to data from SoSoValue, spot Bitcoin ETFs recorded a net outflow of $175 million on Wednesday, while spot Ethereum ETFs saw outflows of $57 million. The single largest outflow came from BlackRock's IBIT, which lost $91.37 million, followed by Grayscale's GBTC with a net outflow of $24.62 million. Spot Ethereum ETFs recorded a net outflow of $52.7 million for the day, with Grayscale's ETHE leading the selling pressure with a $33.78 million outflow, bringing its historical cumulative net outflow to $5.083 billion. This pattern aligns with typical market behavior during major holidays: trading volume plummets, market-making desks reduce positions, and holding strategies turn defensive. Konstantin Vasilenko, co-founder of Paybis cryptocurrency exchange, told media that he did not anticipate a "Santa Claus rally." Due to tax reasons, traders in some regions liquidate cryptocurrencies and exit some risk positions before the New Year, so he does not expect any major moves before January. For now, while U.S. stocks rise and gold shines, Bitcoin's stagnation is sending its own signal: an asset built on excitement is showing none of it as the year ends.