Bitcoin's price trend is currently fluctuating around the Fed's last policy decision of the year. On the surface, there appears to be little movement, but the underlying market structure reveals a very different picture.

Beneath the seemingly stable price range, there is a period of concentrated pressure: on-chain data shows that investors are losing nearly 500 million USD daily, futures market leverage has significantly decreased, and nearly 6.5 million BTC are currently in an unrealized loss state.

This situation resembles the final stages of market contraction rather than a healthy consolidation phase.

However, structural adjustments occurring beneath the surface of apparent stability are not uncommon for Bitcoin, but the timing of this adjustment is noteworthy.

The internal market "capitulation selling" coincides precisely with an external turning point in US monetary policy. The Federal Reserve has ended the most aggressive balance sheet reduction phase in over a decade, and market expectations suggest its December meeting will outline a clearer framework for "shifting toward reserve rebuilding."

In light of this, on-chain market pressures and unresolved liquidity shifts together form the macro backdrop for this week's events.

Liquidity Shift

According to the Financial Times, quantitative tightening (QT) officially ended on December 1, during which the Fed reduced its balance sheet by approximately 2.4 trillion USD.

This move caused bank reserves to fall into historically tight levels, and the secured overnight financing rate (SOFR) has repeatedly tested the upper limit of the policy rate range.

These changes indicate that the market system is no longer flush with liquidity but is gradually entering a phase of "reserve scarcity concerns."

Against this backdrop, the most critical signal from the Federal Open Market Committee (FOMC) is not the market widely expecting a 25 basis point rate cut, but rather the direction of its balance sheet strategy.

Market expectations are that the Fed will clarify its transition to "Reserve Management Purchases (RMP)" through explicit statements or policy documents.

According to analysis by investment research firm Evercore ISI, this plan could earliest launch in January 2026, with monthly purchases of about 35 billion USD in short-term Treasury bills—funds from maturing mortgage-backed securities will be reallocated into short-term assets.

The details of this mechanism are crucial: although the Fed is unlikely to define RMP as "stimulus policy," continuous reinvestment in short-term Treasuries will steadily rebuild bank reserves and shorten the asset maturity structure of the "System Open Market Account."

This operation will gradually increase reserve levels, ultimately leading to an annualized balance sheet growth exceeding 400 billion USD.

This shift will mark the first time since the start of QT that the Fed has issued a sustained expansionary policy signal. Historically, Bitcoin has shown a much higher sensitivity to liquidity cycles than to policy rate changes.

Meanwhile, broader monetary aggregates suggest that the liquidity cycle may have already begun to turn.

Notably, the M2 money supply has reached a record high of 22.3 trillion USD, surpassing the early 2022 peak after a prolonged contraction.

(Note: M2 is one of the core indicators of money supply, categorized as "broad money," encompassing a wider range than base money (M0) and narrow money (M1), providing a more comprehensive reflection of overall social liquidity.)

Therefore, if the Fed confirms the start of "reserve rebuilding," Bitcoin's sensitivity to balance sheet dynamics could quickly rebound.

Macro Traps

The core basis for this policy shift stems from changes in employment data.

Over the past seven months, non-farm employment has declined in five months; simultaneously, job openings, hiring rates, and voluntary resignation rates have all slowed, shifting the employment narrative from "resilient" to "fragile and pressured."

As these indicators cool, the "soft landing" narrative becomes increasingly difficult to sustain, and the Fed's policy options are narrowing.

While inflation has eased somewhat, it remains above the policy target; at the same time, the costs of "maintaining tighter policies for longer" are rising.

The potential risk is that, before inflation fully returns to target levels, labor market weakness could intensify further. Therefore, the information value of this week's Fed press conference may surpass that of the rate decision itself.

The market will focus on how Fed Chair Powell balances two key objectives—maintaining labor market stability and ensuring inflation path credibility. His statements on "reserve adequacy," "balance sheet strategy," and "RMP timing" will shape market expectations for 2026.

For Bitcoin, this means its price movement will not be a binary "up or down" outcome but will depend on the specific direction of policy signals.

If Powell admits to labor market weakness and clarifies the reserve rebuilding plan, the market might see current price fluctuations as disconnected from policy direction—breaking above the 92,000–93,500 USD range would indicate traders are positioning for liquidity expansion.

Conversely, if Powell emphasizes policy caution or delays clarifying RMP details, Bitcoin could remain in a lower consolidation range of 82,000–75,000 USD—an area that includes ETF holdings bottoms, corporate reserves thresholds, and historical structural demand zones.

Will Bitcoin Experience "Capitulation Selling"?

Meanwhile, internal market dynamics further confirm the view that "this asset is undergoing a superficial reset."

Short-term holders continue to sell tokens during market weakness; with mining costs approaching 74,000 USD, mining economics have significantly deteriorated.

At the same time, Bitcoin mining difficulty has experienced its largest single drop since July 2025, indicating marginal miners are reducing capacity or shutting down mining rigs altogether.

However, these pressure signals coexist with early signs of "supply tightening."

Research firm BRN Research told CryptoSlate that in the past week, large wallets accumulated about 45,000 BTC; exchange Bitcoin balances continued to decline; and stablecoin inflows suggest that, should market conditions improve, funds are preparing to re-enter.

Additionally, asset management firm Bitwise's supply indicators show that even with retail sentiment at "extreme fear," various wallets continue to accumulate Bitcoin. Tokens are moving from high-liquidity platforms to long-term custody accounts, further reducing the supply available for capitulation.

This pattern of "forced selling, miner pressure, and selective accumulation" is often a foundation for establishing long-term market bottoms.

Bitwise further added:

"Bitcoin's capital inflow continues to shrink, with the 30-day real market cap growth rate dropping to just 0.75% per month. This indicates that current profit-taking and stop-loss selling are roughly balanced, with losses slightly exceeding gains. This rough balance suggests the market has entered a 'calm period,' with neither bulls nor bears holding clear dominance."

Technical Analysis

From a market structure perspective, Bitcoin remains constrained within two key ranges.

A sustained break above 93,500 USD would place the asset in a "momentum model more easily triggered" zone, with subsequent targets at 100,000 USD, 103,100 USD (short-term holder cost basis), and the long-term moving average.

Conversely, if resistance cannot be broken due to cautious signals from the Fed, the market may retreat to the 82,000–75,000 USD range—an area that has repeatedly served as a "reservoir" of structural demand.

BRN Research notes that cross-asset performance also confirms this sensitivity: ahead of the Fed meeting, gold and Bitcoin show inverse movements, reflecting "liquidity expectation-driven asset rotation" rather than volatility solely driven by risk sentiment.

Therefore, if Powell's statements reinforce the expectation that "reserve rebuilding is the core of the next phase of policy," capital may quickly shift toward assets that respond positively to "liquidity expansion."