Why Bitcoin Faltered in Late December 2025

Why Did Bitcoin ETF Money Leave in Late December?

Bitcoin closed 2025 roughly 30% below its October peak, with ETFs hemorrhaging $200 million on December 24 alone. The culprit? Credit, not headlines.

TL;DR: US bank lending growth collapsed to 2.8% year-over-year in December, down from 4.4% the prior month. Combined with year-end profit-taking, the liquidity that fueled crypto's 2025 rally evaporated. This is a credit story, not a fiscal one.

The Credit Crunch Nobody's Talking About

While analysts fixated on ETF flows and seasonal trading patterns, the real story unfolded in the banking system:

• US bank lending: 2.8% YoY growth (December 2025) vs 4.4% (November)
• Business loans: Declined $15.3 billion week-over-week
• Bitcoin ETFs: Six consecutive days of outflows into year-end

Banks create money when they lend. When lending contracts, the money supply available for speculation—including crypto—shrinks. December's data shows this dynamic in action.

Fiscal vs Credit: Understanding the Difference

Government deficit spending injects base money into the economy. Bank credit expansion multiplies it. Think of fiscal policy as the foundation and bank lending as the structure built on top.

The US ran an $1.8 trillion deficit in fiscal year 2025 (ended September). That's supportive. But credit expansion is what drives risk asset prices in the short term—and that's now contracting.

The ECB held rates steady on December 18, but European banks reported tightening credit standards. Global liquidity isn't expanding; it's plateauing or worse.

What This Means for Crypto in Early 2026

Data Caveat: December macro data is incomplete as of December 31. Full picture emerges in mid-January.

If credit growth continues slowing:

• Risk assets face headwinds regardless of fiscal spending levels
• Bitcoin may consolidate in the $85-95K range until liquidity conditions improve
• Watch for: January bank lending data, Chinese credit figures (delayed from December)

The key insight: Crypto follows total liquidity (government deficits + bank credit), not just one or the other. Right now, one leg of that stool is weakening.

The Takeaway

Bitcoin's late-December weakness isn't about sentiment or technical levels. It's about liquidity mechanics. US bank credit growth is slowing precisely when seasonal factors reduce trading activity. That's a double headwind.

For those allocating to crypto: The fiscal backdrop remains supportive, but credit conditions matter more for near-term price action. Monitor bank lending trends as closely as you watch government spending.

Note: This analysis is limited by incomplete December 2025 macro data. Full credit and fiscal figures typically release 2-3 weeks after month-end.