The Breakdown - Bitcoin Slides Again as Anger Takes Over the Bear Market

Episode Date: December 17, 2025

Bitcoin takes another sharp leg down, wiping out leveraged longs and pushing market sentiment firmly into the anger phase of this bear market. Thin liquidity, failed dip-buying on leverage, and continued whale selling are making a durable bottom hard to form, even as smaller wallets continue to accumulate. Macro pressure from a hawkish Fed, year-end risk aversion, and broader market unease are weighing on prices, while MicroStrategy’s latest Bitcoin buys fail to spark a rally. Still, a more constructive regulatory tone from the SEC on crypto privacy stands out as a rare bright spot amid otherwise gloomy market conditions. Enjoying this content? SUBSCRIBE to the Podcast: https://pod.link/1438693620 Watch on YouTube: https://www.youtube.com/@TheBreakdownBW Subscribe to the newsletter: ⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠https://blockworks.co/newsletter/thebreakdown⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠ Join the discussion: https://discord.gg/VrKRrfKCz8 Follow on Twitter: NLW: https://twitter.com/nlw Breakdown: https://twitter.com/BreakdownBW

Welcome back to The Breakdown with me, NLW. It's a daily podcast on macro, Bitcoin, and the Big Picture Power Shifts remaking our world. What's going on, guys? It is Tuesday, December 16th, and today we are talking about Bitcoin taking another leg down. Before we get into that, however, if you are enjoying the breakdown, please go subscribe to it, give it a rating, give it a review, or if you want to dive deeper into the conversation, come join us on the Breakers Discord. You can find a link in the show notes or go to bit.L.Y slash breakdown pod. Well, friends, Bitcoin is heading back to the lows as the bare market deepens. Bitcoin plunged at the Monday Open, trading as low as 85,000. Now, this is a slightly higher low than the past two drawdowns

of this bare market, but the wipeout snuffed out any hopes of a recovery. The drawdown was a violent affair to begin the trading week. Bitcoin lost 4.3% across the first four hours of trading in New York. That drawdown liquidated 200 million in long positions, once again rinsing leverage out of the system. time after time over the past few months, we've seen traders try to buy the dip on leverage only to come undone. Some claimed foul play, with Defy Tracer tweeting, Binance and Wintermute dumping millions of Bitcoin. They liquidated over 100 million in long positions in five minutes. This is pure manipulation.

That viral tweet was accompanied by block records of Binance hot wallet sending Bitcoin to various other exchanges. Not really much of a smoking gun. But the virality of the tweet captured the current sentiment a few months into this bare market. We are now clearly past the denial and, firmly into the second stage of a bare market, which is, of course, anger. There's a ton of chatter around marketmaker Wintermute, who are apparently both insolvent and also dictating price action across the entire crypto ecosystem. And while we have nothing but rumors to go on, it's going to be extremely difficult to form a bottom if everyone is revenge trading on leverage. The bargaining stage

should be next when CT begs for a positive catalyst. And then eventually after that, we will reach the acceptance stage, and hopefully a strong spot-led recovery can begin. For now, that is firmly in the future. Volumes are low, and market structure looks pretty bent out of shape. Highblock capital noted a huge divergence between cohorts and the spot market. Smaller Bitcoin wallets have been accumulating decently, adding 470 million in buy-side volume so far this month. However, Bitcoin whales have been net sellers to the tune of 2.8 billion. In other words, Bitcoin is going down because there's more sellers than buyers. Now, to mix in a positive note, this flow data doesn't suggest a zero-interest,

zero-bid-bear market. There's still plenty of interest in accumulating Bitcoin with short short-term holders trying to front-run a recovery. That cohort's spent to output profit ratio, which measures if Bitcoin is being sold at a profit, is still slightly negative. However, it's recovered significantly since the beginning of the month. Bitcoin generally doesn't recover until these traders are profitable as a group, and they're not far off now. Still, the narrative is brutal, and few are willing to stick their neck out and call a bottom just yet. Beyond crypto, the Fed's hawkish cut and indecision about the next Fed chair are driving risk-off sentiment to end the year. Polymarket odds for Kevin Hassett have been diving since he

emphasized his independence from the White House. Hassett is still the slim favorite, but former Fed Governor Kevin Warsh is seen as a close second. Warsh famously called QE a Ponzi scheme in 2022. But with the White House pushing for easy money, all bets are off on how Warsh would act as a Fed chair. Widespread fear of an AI bubble is also weighing on markets. And even beyond all that, there's a prevailing sentiment that the year has been good, so no need to force positions into Christmas. Most are expecting thin liquidity and risk that's simply not worth taking to end the year. On-chain volumes for Bitcoin seem to be reinforcing that sentiment. Active addresses fell to a two-year low last week. Just 660,000 addresses transacted. The lack of activity has led to a 20% drop in minor

revenue compared to the third quarter as fees dry up to almost zero. Even a big buy from Michael Saylor wasn't enough to perk up the markets. Micro Strategy registered an almost billion-dollar buy last week, their second large buy in a row after months of tiny purchases. That buying pressure may have supported Bitcoin last week, but it doesn't seem to have sparked any enthusiasm from the wider market. Micro Strategy didn't announce whether their buying was funded by debt or equity, but previous rounds were heavily skewed towards stock. Their stock is currently priced at a 10% premium to their Bitcoin Treasury, so not a lot of room for further fundraising. All told, it doesn't look like Bitcoin is getting a Santa rally to end the year. Bitcoin is down 4.35%

so far this month, making it the worst December since 2021. Now, while markets are a little dreary, the regulatory narrative continues to provide positive headlines. This week began with an SEC roundtable on financial privacy, which has been a somewhat overlooked element of crypto so far this year. SEC Chair Paul Atkins demonstrated a clear understanding of the issue, warning that without strong privacy features, blockchains could become, quote, the most powerful financial surveillance architecture ever invented. He continued, indeed, if the instinct of the government is to treat every wallet like a broker, every piece of software as an exchange, every transaction as a reportable event, and every protocol as a convenient surveillance node, then the government

will transform this ecosystem into a financial panopticon. Frankly, this discussion is well overdue. We've seen administration after administration treat citizens its criminals merely for wanting to safeguard their financial privacy. And that impulse was even worse in crypto, where multiple developers were prosecuted for creating privacy technology that was misused by bad actors. The government solution has typically been to throw the baby out with the bathwater and attempt to force full transparency on the crypto sector. Commissioner Hester Purse gave another one of her memorable speeches on the topic stating, our national degradation of financial privacy and the rules that embody it are overdue for a change, and crypto is helping to nudge a reassessment.

She added that crypto, quote, opens new possibilities for transactions without financial intermediaries that are central to our existing financial surveillance paradigm. First concluded, protecting one's privacy should be the norm, not an indicator of criminal intent. Government should resist the temptation to force intermediation for the purpose of creating a regulatory beachhead or facilitating financial surveillance. Legacy internet and infrastructure are brittle, plagued by downtime, coverage gaps, and outdated financing models. Communities and builders are left behind while capital sits locked out. Althea is changing that. Since 2018, their technology has powered resilient, sustainable networks across the U.S. and abroad. With Althea L1, they built the world's first blockchain purpose-built

for utilities and telecom, turning infrastructure into a transparent, investable asset class. Through liquid infrastructure, networks can now be financed in real time, operated more efficiently and scaled to meet the $3 trillion telecom and utilities market. This is fintech for infrastructure, connecting capital directly to builders and returning revenue seamlessly to funders. No middlemen, no bottlenecks, just sovereign, resilient infrastructure that works for people, communities, and investors alike. Learn more at Althea.net and find them on Crackin to join the future of infrastructure finance. Now, the actual roundtable featured a who's who of crypto privacy tech. Zcash founder Zucco Wilcox was present along with Jill Gunter of Espresso Systems, Catherine Kirkpatrick

Baas, the General Council of Starkware, and many more. They all pointed out that many of the pioneers of privacy tech weren't able to make it because they're either in jail or under house arrest for the way their code was used. To that point, earlier on Monday, President Trump said he was considering a pardon for the developers of privacy-focused Bitcoin wallet samurai. The roundtable didn't set any new policy, but it gave a clear indication that this SEC is pro-cryptop privacy and is well read on the issue. Ian Myers, a cryptography professor tweeted, surprising to hear the SEC chairman acknowledge that blockchain's exposed too much data and we can't create a digital penopticon. Even more surprised to hear Commissioner Hester Perce mentioned Matthew Green and I's

work on privacy and zero-knowledge proofs. Now, the six SEC roundtables this year have meaningfully advanced policy in a lot of areas, but this one could be the most impactful. Rather than dealing with market structure or security's definition, it spoke to the civil liberties that are central to the U.S. project. We now have a responsive and supportive SEC, meaning there's likely never been a better time to be building crypto-privacy tech. On the product side of the house, Visa has announced a new stable-coin advisory practice to help institutions implement the tech. The new advisory arm will provide advice to banks, merchants, and fintech companies as they start to roll out and integrate stablecoins into their platforms. Alongside basic training on the technology,

the advisory will focus on go-to-market planning and technical assistance. Giving a testimonial, Matt Friedman, the senior VP of Navy Federal Credit Union said, stablecoins may represent an opportunity to enhance speed and lower cost in payments. So with the support of Visa, we are evaluating how this technology could fit into our broader strategy to deliver meaningful value to our 15 million members worldwide. Now, for Visa, this bet makes a ton of sense. They're going to be offering a range of stablecoin products and integrations, so it stands to reason they should help push the technology forward through an in-house advisory service. The initiative also implies a ton of demand to get stablecoin strategy off the ground in the broader financial ecosystem. It also speaks to the crypto industry, somewhat missing the mark

this cycle. This service was a prime opportunity for a crypto-native firm, but instead, Visa is coming to take the entire market. Coming into the bull market, meme coins with a shiny new plaything, but institutional adoption has, of course, been the lasting theme. With numerous announcements to end the year without a crypto name attached, it kind of feels like large sections of the industry missed the boat. Still, Visa's head of crypto Kai Sheffield has been at this for a long time and definitely deserves the success he's now seeing. Announcing the division, he tweeted, over the past year, I've been shouting from the rooftops that every bank needs a stablecoin strategy, excited to formally launch our stablecoin advisory practice to help our clients navigate the space.

Now, closing out with one more in the stablecoin world, Circle sparked a huge controversy after acquiring interop labs. Interop, as the name suggests, develop interoperability technology for crypto networks. Circle wants to build their technology into their forthcoming arc blockchain. Now, there's nothing controversial about crypto MNA by itself, but Circle decided to buy out interop's equity while leaving behind the network token Axelr or AXL. Circle said the foundation and the network will, quote, continue to operate independently under community governance. Now, I think it's fairly understandable why a public company wouldn't want to acquire a token and a crypto network with all the compliance headaches that come with it, but the deal still left

a bad taste for many crypto investors. SolarCurve wrote, sure, it's legal for Circle to acquire Axelar, a team which is vested and sold tons of Axel over the years, with token holders getting zero upside or benefit, but it's still ultimate scumbag behavior. Simon Dedek, the managing partner of Moonrock Capital tweeted, another acquisition, another rug. Circle acquiring Axelar while explicitly excluding the foundation in the Axel token is outright criminal. If not legally, then morally, if you're a founder looking to issue a token, treat it like equity, or kindly just move on. Now, after the initial D-5 boom of 2020, many joked about worthless governance tokens.

And that comment isn't just about the axelars of the world, even so-called blue-chip defy tokens never saw a resurgence. Investors recognize that without equity rights or a profit-sharing mechanism, there might be little reason to value the tokens. And frankly, the role for all coins without a real value proposition is getting a lot less clear. Without the regulatory arbitrage factor, which is rapidly disappearing, and Dow governance sputtering out, most of these tokens have little reason to exist.

Felix Javan, the host of forward guidance commented, crypto industry speed running the implications of what happens when there is no strong equity rights surrounding tokens. Tokenized equity is the correct form factor. That's going to do it for today's slightly dreary episode of the breakdown. Appreciate you guys listening as always, and until next time, be safe and take care of each other. Peace.