<div id="readability-page-1"><p>Author: Ben Fairbank, Co-founder and CEO of RedFOX Labs; Translated by: Shaw Jinse Finance</p><p>We all seriously misjudged the market. I admit, I didn't anticipate it would develop this way. Frankly, I thought by this point we were already at the tail end of a crazy bull market, or at least nearing its end, but this bull market hasn't even started yet.</p><p>In the late summer of 2025 (US summer), senior analysts and Wall Street banks predicted a new round of **&#34;monthly bull market&#34; in the cryptocurrency market**. **Goldman Sachs and JPMorgan Chase predicted that the price of Bitcoin could surge to over $220,000, or even approach $250,000. Fundstrat's model predicted even higher.</p><p> However, the market experienced a dramatic reversal, with Bitcoin prices plummeting 30% from their October 6 peak of $126,000 to approximately $84,000 in just six weeks. If you felt caught off guard or thought it was some kind of witchcraft, you are not alone. The collective misjudgment of this cycle is the first lesson of today's story. The global economic trends are the invisible hand behind the charts. The impending crisis of 2025 is inexplicable. The ongoing conflicts in Ukraine and Gaza, the US-China competition, and the turmoil in Sudan have all contributed to low morale. In addition, financial fraud and corruption are unfolding around the world. Trade protectionist policies. In October, US President Trump announced a 100% tariff on Chinese imports in retaliation for China's restrictions on rare earth exports. This news caused the S&amp;P 500 to lose $1.5 trillion in market capitalization within minutes and triggered a massive sell-off in the cryptocurrency market. </p><div><p><strong>Global Monetary Policy Squeeze</strong> Who doesn't like this squeeze? The Federal Reserve cut interest rates to 3.50%-3.75% in December and hinted at a possible pause in quantitative tightening (QT), but the Bank of Japan is expected to raise its policy rate to 0.75%, which could disrupt yen carry trades that fund leveraged cryptocurrency positions. These contrasting moves are squeezing global liquidity from two sides, creating a tricky situation. The employment situation is dire, and economic growth is sluggish. In November, US non-farm payrolls increased by only 64,000, while the unemployment rate surged to 4.6%, a four-year high. Wage growth stagnated at 3.5%. Investors interpreted these figures as both a harbinger of recession and a possible intervention by the Federal Reserve, which increased market volatility rather than clarity. It seems everyone is confused. Is quantitative tightening about to end? Many analysts predict that the Federal Reserve will end its quantitative easing (QT) policy by the end of 2025 or early 2026, at which point its reserves will fall to around $2.7 trillion to $3.4 trillion. Ending QT would bring liquidity back into the market, which historically has typically supported risk assets like Bitcoin. However, if QT ends due to a recession, this benefit may only be temporary, so hopefully that's not the case. This volatile macroeconomic backdrop has shaken the simplistic narrative of &#34;only rising, never falling.&#34; As policymakers oscillate between stimulus and tightening policies, and geopolitical tensions impact supply chains, cryptocurrencies are behaving less like digital gold and more like a high-beta macroeconomic asset. This will likely disappoint cryptocurrency enthusiasts who focus solely on the technology itself. October 2025: A Market Flash Crash That Rewrites the Cycle The crypto market flash crash of October 11th was the most significant event of this cycle. On that day, partly due to Trump's tariff bombshell news, and unrelated to Binance, over $19 billion in leveraged positions were forcibly liquidated within 24 hours. Bitcoin fell nearly 10% intraday, briefly dipping below $110,000, while many altcoins plummeted 30% to 60%. 1.6 million traders were affected, but no one really paid attention. This incident was downplayed, as if nothing had happened, requiring no further explanation. However, the shock it caused was no less than that of any major global attack or catastrophic event, which would have warranted a rigorous investigation and accountability. Order book analysis revealed that the real disaster was caused by automated operations. Amberdata's legal report found that 70% of the liquidation losses occurred within a mere 40 minutes, with a staggering $9.89 billion in deleveraging compressed into a series of algorithmic operations. At its peak, $3.21 billion vanished in 60 seconds within a single minute, with over 93% of these orders being forced sell orders. Open interest plummeted by $36.7 billion, order book liquidity evaporated by 98%, and bid-ask spreads soared 321 times. In other words, macroeconomic news ignited the fuse, but leverage was the real bomb. Leverage is the real engine of volatility. The growth of cryptocurrencies has spawned complex products such as perpetual futures, on-chain leverage protocols, and high-frequency trading bots. These tools amplify both gains and losses. The &#34;Cryptocurrency Crash&#34; report points out that when stop-loss orders were triggered, $17 billion worth of long positions were forcibly liquidated. Even after the crash, the US spot Bitcoin ETF still saw outflows of approximately $3 billion in November. On the decentralized exchange (DEX) HyperLiquid, margin traders typically use leverage of 10 to 50 times, and approximately $2 billion in positions were forcibly liquidated in just 24 hours. So, you can blame those who triggered the crash, but without such high leverage, none of this would have happened. High leverage shortens market memory; price fluctuations no longer show trends but become sharp and glaring. Order books thinned, and algorithmic liquidation outpaced human reaction time. The clean, exhilarating rallies of past cycles were replaced by violent squeezes and sell-offs. Pure bullish investors expecting a surge may never see it, not because leveraged trading has stalled, but because the market structure has changed—at least superficially. The Missing “Top” and the Four-Year Cycle: For veterans of the past four-year cryptocurrency cycle, the lack of a traditionally significant surge top is perplexing. In past halving cycles, Bitcoin typically peaked around 12 to 18 months after the block reward halving. In April 2024, the Bitcoin block reward halved again, and by October 6, 2025, the price peaked approximately 17.5 months later, consistent with historical patterns. However, this rally did not follow the expected parabolic trajectory, instead stalling amidst a macroeconomic storm. The 50-week moving average quickly reversed downwards, leading many to believe a bear market had begun. The reality is even worse. Bitcoin is now down 13% from its January 1st price, underperforming gold and tech stocks—a truly absurd situation. However, I believe the halving cycle hasn't been broken; it's simply been prolonged and distorted by external shocks such as tariffs, liquidity tightening, interest rate differentials, and the boom-bust cycles of artificial intelligence. Historically, the effects of halvings have often resurfaced once macroeconomic headwinds subside. This isn't the end, but rather a transition to tokenized finance. It's easy to interpret this crash as a rejection of cryptocurrencies. However, beneath the price volatility, the structural progress cryptocurrencies have made in 2025 surpassing any year in history—consider this carefully. Pantera Capital cites a series of achievements, including supportive governments for cryptocurrencies, the SEC's repeal of SAB 121, the signing of stablecoin legislation, Coinbase's inclusion in the S&amp;P 500, and the successful IPOs of several blockchain companies. The on-chain value of Real-World Assets (RWAs) has increased by 235%, and the market capitalization of stablecoins has increased by $100 billion. Due to clearer regulatory policies, banks can now hold crypto assets off-balance-sheet. Tokenization is poised to drive the next wave of adoption. Forbes predicts that 2026 will &#34;belong to tokenized RWAs,&#34; including tokenized funds, government bonds, and other tools that address real-world problems such as settlement delays and capital inefficiencies. Tokenization redefines cryptocurrencies from a speculative asset class as a new form of ownership representation and shifts activity from trading to infrastructure building. In 2026, regulatory changes such as the GENIUS Act and state-backed stablecoin initiatives will further encourage institutional participation. From this perspective, this pullback is not a complete abandonment, but rather a final repricing before entering a more mature stage. Investors are shifting from network meme tokens to tokenized bonds, on-chain stocks, and real-world assets. The liquidity drain caused by quantitative tightening and the unwinding of leverage could quickly return once the Federal Reserve stops shrinking its balance sheet. Trump, Politics, and the Midterm Election Catalyst: Politics always permeates the market, and the upcoming 2026 US midterm elections are no exception. I personally believe this is Trump's Plan A. Axios reports that President Trump and his advisors are almost fanatically convinced that the US economy will &#34;take off like a rocket&#34; by early 2026. This optimism stems from the &#34;One Big Beautiful Bill,&#34; signed in July 2025, which extends the 2017 tax cuts and introduces new tax breaks for tippers, overtime workers, and parents. Treasurer Scott Bessant predicts a significant increase in tax rebates, with workers potentially receiving up to $2,000, which many will use as leverage, while businesses can benefit from tax breaks on capital expenditures. These measures are expected to stimulate consumption and investment. Market strategists anticipate that stocks, particularly in artificial intelligence and energy sectors, will rise ahead of the midterm elections. However, Trump's protectionist tariff policies have simultaneously driven up consumer prices and exacerbated inflation. Data from AInvest shows that the effective tariff rate will surge to 18% by 2025, triggering a 17% drop in global markets and causing a 14% decline in the Australian stock market. Historically, the US stock market has fallen by an average of 17% in midterm election years due to political uncertainty. Investors hoping for a bull market before the midterm elections should be aware that policies aimed at stimulating economic growth, such as tax cuts and deregulation, also carry inflation and fiscal risks. Markets could surge due to optimism or plummet due to escalating inflation. The market is currently like two fat men on a seesaw, it's a matter of which is heavier. Looking ahead to 2026, the fate of cryptocurrencies may depend on two major factors: **employment trends and liquidity policy**. The weak November jobs report highlighted the slowing trend of the US economy. In response, the Federal Reserve lowered interest rates and paused quantitative easing (QT). Analysts expect QT to end completely in early 2026, which will expand bank reserves and support risk assets. **Past cycles show that Bitcoin tends to rise when the Fed shifts from tightening to neutral or easing.** Therefore, this may be a factor to watch. Meanwhile, the December rate cut had almost no impact on Bitcoin prices, practically none, and despite the Fed's dovish stance, Bitcoin prices remain below the $90,000 level. This lukewarm response indicates that liquidity constraints and ETF outflows continue to put pressure on the market. Frankly, the market performance we're seeing isn't the same as the market performance we're not seeing. Investors are waiting for clear information on inflation, wages, and the Fed's next move. In a familiar Australian slang term, this is what we're currently in a &#34;pregnancy pause.&#34; What will the future hold? Nobody really knows. If they did, they wouldn't have missed the October market crash, right? But we can glean some lessons from this: Macroeconomic factors are crucial. Cryptocurrencies are no longer an isolated speculator's paradise; they are inextricably linked to geopolitics, fiscal policy, and central bank liquidity. I believe that in addition to focusing on on-chain metrics, we should pay close attention to tariffs, central bank meetings, and employment data. Leverage amplifies the pain. The October liquidation wave demonstrates that high leverage can wipe out billions of dollars in wealth in minutes. Future rebounds may be stronger, but as long as leverage of 10x to 50x persists, the sell-off will be even more brutal. Tokenization is a structural trend. Even with price declines, RWA tokenization, stablecoins, and regulatory clarity are increasing. Their applications are shifting from speculative trading to potentially underpinning global financial infrastructure. Politics is a double-edged sword. Trump's policies may stimulate short-term growth and trigger a rally before the midterm elections, but tariffs and deficit issues could backfire. Investors should prepare for market volatility ahead of the 2026 midterm elections. Be hopeful, but also humble. Explosive growth is still possible in 2026 with the end of quantitative tightening and a weakening labor market. But if that fails, we must face reality: perhaps we no longer understand this market. Perhaps it no longer belongs to us. Cryptocurrency remains an emerging and rapidly evolving experiment. To navigate the present, we must find a balance between data and belief, macroeconomic understanding and technological optimism. Sometimes, the most honest approach is to admit we've misjudged the current situation, but still believe the future will bring change. Or, we can be blindly optimistic until everything goes smoothly. This choice is ultimately yours.</p></div></div>

<p>Ben Fairbank discusses the unexpected developments in the cryptocurrency market, highlighting predictions from Goldman Sachs and JPMorgan Chase about Bitcoin's potential surge, which were contradicted by a dramatic price drop. Global economic factors, geopolitical tensions, and financial policies have contributed to market volatility. The October 2025 flash crash, triggered by Trump's tariff announcement, led to massive liquidations, emphasizing the role of leverage in market instability. The narrative of cryptocurrencies as stable assets is challenged by their high-beta macroeconomic behavior.</p>

The Truth Behind the Current Cryptocurrency Market