The Breakdown - Bitcoin’s Fragile Recovery

Episode Date: November 26, 2025

Bitcoin is climbing back from Friday’s drop, but the bounce looks weak and uncertain. Liquidity is shallow, flows are scattered, and the futures market just saw one of its sharpest resets of the cycle. Analysts say consolidation is more likely than a clean reversal, even as rate-cut odds rise and long-term holders accumulate. Institutional sentiment is mixed, CME derivatives are hitting records, and ETF flows remain soft, leaving a market that feels steadier than last week but far from confident the bottom is truly in. 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, November 25th. And today we are talking about Bitcoin's fragile recovery. 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.ly slash breakdown pod. All right, well, Bitcoin continued its slow and tentative recovery, but is the bottom truly in?

Bitcoin traded up to $89,000 on Monday after an early morning stumble. Price receded a little on Tuesday morning but seemed to hold steady at the $87,000 level. Now, Friday might have been the bottom for this drawdown, but so far the recovery does not inspire a ton of confidence. Bitcoin crashes typically see a strong bid in a rapid reversal, especially in the middle of a bull market, but this recovery feels tepid and uncertain. Vincent Liu, the CIO at Kronos research, said the current price action, quote, reads like a post-flush bounce, liquidity pockets shallow, flow fragmented, and bids probing for stability,

all while long horizon holders are accumulating. Expect consolidation with tight ranges around 85 to 90K, as liquidity is shallow and stops are being picked off. Rachel Lucas, a crypto analyst at BT markets commented, Bitcoin is consolidating after its deepest correction of the cycle. It's holding above 86K, which is constructive short term, but the structure remains fragile. There are very few analysts currently willing to call the bottom at this stage, with most preferring to hedge their options. Even Bitmex co-founder Arthur Hayes was uncertain, not a normal state for him. Posting on Monday, minor improvements in dollar liquidity, Fed QT stops December 1st, this Wednesday will probably be

the last fall on the balance sheet. U.S. banks increased lending in November. We chop below 90K, maybe one more stab down into low 80s, but I think 80K holds. Might start nibbling, but leave the bazooka until the new year. For the Fed watchers, odds of a December cut are now up to 81%, which is starting to get pretty close to a sure thing two weeks out. Hayes doesn't think a rate cut will do much, but is on the lookout for the return of QE or some other Alphabet soup liquidity program from the Fed. He wrote, Bitcoin rallied from 16K to 100K and rates were pretty much higher due to the reverse repo decline. Quantity of credit is more important than the price. We could hit an all-time high with Fed funds at 10% if the Fed did unlimited QE at the same time. Now, few are predicting the return of QE in any meaningful amount,

but Powell did explain the Fed's framework at the last FOMC meeting. He said that the balance sheet will expand in line with GDP growth, with the goal being to keep it flat in relative terms. With that in mind, hazes on the lookout for a collapse in stocks to trigger emergency measures. Last week, he said, we are playing for more money printing, and for that we need AI tech stocks to crater. So, while it doesn't look like we're getting a V-shaped recovery, many believe the worst is behind us. Charles Edwards of Capriol Fund blamed the entire drawdown on flip-flopping rate expectations. He wrote, we started November at 90% odds for a cut in December, dropped to only 30% and are now back at 80% likelihood of a rate cut. As the market reverts,

expected it will carry Bitcoin somewhat higher. Swiss block posted, Bitcoin has taken its first real step towards forming a bottom. The risk-off signal is dropping sharply, which tells us two things. Selling pressure has eased, and the worst of the capitulation is likely behind us for now. One big signal to take in this is the drop in futures open interest. Open interest had been highly elevated at the end of October, but saw its sharpest 30-day drop of the cycle. It seemed as though leveraged traders were trying to catch the knife in gradually gave up. The last big liquidation on Friday seemed to rinse the futures market, and the last few days of price action were largely driven by spot market buying. Analyst Darkfrost wrote on CryptoQuant,

historically these cleansing phases have often been essential to forming a solid bottom and setting the stage for a renewed bullish trend. Deleveraging, forced closures of overly optimistic positions, and a gradual decline in speculative exposure, help rebalance the market. The last time that open interest fell that sharply was in the closing months of 2022 following the FTX collapse, demonstrating just how brutal this drawdown has been relative to anything we've seen during this cycle. Still, it's a weak recovery and most people want to see a little bit more before they have confidence the drawdown is over. Analyst Michael Vandapope wrote,

upcoming week is going to be decisive for Bitcoin. Fear and panic are maxed during the past days. If Bitcoin can rally back to 90 to 96K and it's able to stay at those levels, then the chances of a revival towards a new all-time high have significantly increased. Meanwhile, pomp is just price insensitive, tweeting, If you liked Bitcoin at 125, you should love it at 89. Confidence is also slowly returning to the ETF market. Bloomberg's Eric Balconis wrote, I bit short interest has plummeted. It wasn't exactly high to begin with at 2% of shares,

but it's almost back to where it was in April before the rally. Quoting the report he was sharing data from, he added, traders tend to short into strength and cover-in downturns. Someone in the comments asked for a price prediction to which Belcunis responded, no idea, I cannot predict the future, nor do I believe in market timing. What I do know is that this asset has a 100% track record of coming back from sometimes nasty downturns to hit all-time highs. Kuhus gives an interesting insight into the way institutional investors think about Bitcoin. He only started covering the asset class in the second half of 2023 in the lead-up to the

ETF launch the following January. Bacunis and the institutional investors who bought Bitcoin in 2024 have never seen a crypto winter. They've barely ever seen a drawdown that doesn't end much higher a few months later. Contrast that with the Bitcoiners who have been around a few cycles. There are a lot of people who remember thinking in 2014, 2018, and 2022 that Bitcoin might be over for good. While this drawdown has been painful, there's basically no one in Tradfai talking serious. about Bitcoin dropping to actual zero. If ETF buyers are driving price action during this cycle, then maybe the new common knowledge is that Bitcoin always recovers and usually does so pretty

quickly. That view isn't showing up in the flows just yet, with Monday adding another $150 million outflow. But perhaps the TradFive buyers will be more resilient than we expect. 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. Over on the CME, crypto derivatives markets are going absolutely ballistic. Combined futures and options markets hit a new combined daily volume record on Friday. The previous record was set on August 22nd, a day when Bitcoin spiked after a two-week drawdown from a then-all-time high. The CME has steadily become the

dominant venue for crypto derivatives over the past year. The market has seen average daily volume more than double year over year and open interest is up 82%. In a press release, Giovanni Vcioso, the global head of cryptocurrency products at CME Group said, amid ongoing market uncertainty, demand for deeply liquid regulated crypto risk management tools is accelerating. Clients across the globe continue to turn to our benchmark, cryptocurrency futures and options to hedge their risk and pursue opportunities in this complex environment, with both large institutions and retail traders driving record activity across our product suite. The CME is generally, is generally viewed as an institutional trading venue with a small minority of retail traders.

To the extent that's still the case, it's interesting to see volume spike as crypto sees its worst drawdown of the year. We could be watching hedging behavior, as mentioned, or it could be a spike in speculative trading. Crypto continues to be the highest volatility asset available at a similar size. U.S. stock indices have also seen a drawdown over the past month, but the price action has been relatively orderly and mild. Crypto, on the other hand, is offering traders an extremely high volatility profile that could be driving demand. Analyst Tyler Hill wrote, CME just hit its highest-ever crypto trading volume, a pretty clear sign that institutions are more active than usual. Derivatives volume doesn't predict direction, but it does show where the big players

are paying attention. If institutions keep sizing in like this, it'll be interesting to see how spot markets react over the next few weeks. By the way, those record levels on the CME also validate their decision to double down on crypto. Smaller contract sizes were added last year, and CME Group is planning to move to 24-7 trading on crypto products early next year. The recovery has even reached micro-stratage, with the stock seeing a 5% bounce on Monday. Analysts have been watching MicroStrategy closely during the drawdown, with many viewing the company as a canary in the coal mine. The stock is down 40% over the past month, outperforming Bitcoin to the downside. While the Monday recovery gives some hope, T.D. Cowan is concerned

that MicroStrategy's financing options are narrowing. In a research note, they said that the stock price premium is heading towards crypto-winter lows. The stock is currently priced at 1.2 times their Bitcoin Treasury, a level that hadn't been seen since mid-2020. too. Microstrategy can't comfortably sell stock to raise money without diluting shareholders at these levels, so that avenue of fundraising hasn't been operating recently. Monday passed without Micro Strategy registering a Bitcoin purchase, and without a recovery in Bitcoin, it's a little unclear where Micro Strategy will get their next tranche of funding from. They tapped European debt markets for the first time earlier this month, and although the raise was oversubscribed,

that might not be a sustainable path. The major concern is that Micro Strategy has seen more than a year of premium compression on a trailing 12-month basis. It doesn't look like this is a one-time loss of pricing power for the stock, it seems that the market is systematically discounting the stock to the value of the Treasury. Still, TD Cowan held strong on their bullish view for Micro Strategy. They maintain that Microstratology will own 815,000 Bitcoin by the end of 2027, roughly at 25% increase from where they are currently. Analysts also maintained a $535 price target for the stock, a tripling from current levels. They said this price represented a 0% premium to their Bitcoin holdings, essentially expecting Bitcoin price appreciation to do most of the work. The note stated, a bias against Microstratory is a

is a bias against Bitcoin, and we expect it will outperform to the extent Bitcoin recovers. The note also acknowledged that Microstrategy will probably see a delisting from MSCI indices. That opinion triggered a huge amount of outrage at JPMorgan when it was raised in their note last Friday, but T.D. Cowan wrote, though it feels capricious, we now expect Bitcoin Treasury companies like strategy will be dumped from all MSCI indices this coming February. MSCI has itself proposed as much, and we expect a formal decision will be announced mid-January.

Still, they argued the decision may be as misguided as it is unfortunate. The note concluded, regardless of index inclusion, strategy continues stacking Bitcoin faster than corresponding liabilities. Though perhaps counterintuitive, it should necessarily trade it a premium to the value of its underlying holdings if Bitcoin becomes increasingly integrated into global finance. Speaking of JP Morgan, Strike CEO Jack Mullers has been debanked by the company. He wrote on Monday, last month, J.P. Morgan Chase threw me out of the bank. It was bizarre. My dad has been a private client there for 30-plus years. Every time I asked them why, they said the same thing. We aren't allowed to tell you. While many were concerned that this was the sign of another round

of Operation Choke Point, Tether CEO Palo Arduino tweeted, I think it's for the best. Moller seemed to agree posting a picture of the letter he received, adding, yes, a proud moment, so proud I got it framed. The letter was the standard one that I'm sure many of you familiar with, the one that I got from Bank of America a couple years ago. It discussed concerning activity on Moller's account and a commitment to, quote, regulatory compliance and ensuring the security and integrity of the financial system. Now, obviously, Mollers is doing just fine without that account, but it's going to be important to see whether this is a warning sign of more trouble to come or just a singular event. Senator Cynthia Lummis seems to be concerned, tweeting, Operation Chokepoint 2.0 regrettably lives on.

Policies like J.P. Morgan's undermine confidence in traditional banks and send the digital asset industry overseas. It's past time we put Operation Chokepoint 2.0 to rest to make America the digital asset capital of the world. Anyways, lots to keep an eye on as we head into this holiday session. For now, that is going to do it for today's breakdown. Appreciate you listening, as always, and until next time, be safe and take care of each other. Peace.