New Years Eve
December 31, 2025
Bitcoin at $87,923 (-5.9% YTD) as of 4 PM EST.
I. BREAKING HEADLINES & THE FINAL COUNTDOWN
1. FED PUMPS RECORD $74.8B LIQUIDITY INTO ECONOMY - BULLISH FOR 2026?
The Headline Everyone Missed on New Year’s Eve:
December 31, 2025: The Federal Reserve injected $74.8 BILLION into the economy through repo operations—the LARGEST SINGLE-DAY INJECTION OF 2025.
This comes after $26B on Dec 29, $3B on Dec 30. Total last 3 days: $103.8B.
Why This Matters:
Liquidity = Rocket Fuel for Risk Assets
When the Fed pumps cash into the financial system, it lowers borrowing costs, eases credit conditions, and encourages risk-taking. Historically, Bitcoin LOVES liquidity.
The Timeline:
Dec 1, 2025: Fed officially ENDED Quantitative Tightening (QT ended after 3.5 years, removed $2.4T from system)
Dec 11-31: Fed injected $120B+ through repos and Reserve Management Purchases
Dec 31: RECORD $74.8B single-day injection
What Changed:
Before: QT (tightening) = draining liquidity = bearish for risk assets
Now: Repos (easing) = adding liquidity = bullish for risk assets
The Crypto Market Response:
Immediate (Dec 30-31): - BTC ETFs: +$355M inflows on Dec 30 (ending 7-day outflow streak!) - ETH ETFs: +$50M inflows (ETHE led) - Crypto market cap: Broke downtrend - Analyst Ted Pillows: “Crypto MCap has broken out of its downtrend. Things are looking good for a relief rally.”
Is This QE (Quantitative Easing)?
Technically NO. The Fed says repos are “temporary” (paid back within days), not permanent like QE.
But functionally? It’s liquidity. And markets don’t care about technical distinctions—they care about CASH FLOW.
BitMEX Co-Founder Arthur Hayes: Predicts Bitcoin to $200K in 2026 based on Fed’s “Reserve Management Purchases” which he likens to QE (even though Fed denies it).
Why Now?
Official Reason: “Routine year-end liquidity management” (banks need extra cash for holiday operations, regulatory requirements)
Real Reason? System stress. When repo operations spike this hard, it signals banks NEEDED more dollars than usual. Not panic, but not “routine” either.
What It Means for Bitcoin:
Historical Pattern: - Late 2020: Fed liquidity surge → Bitcoin +300% in 6 months - 2023: Fed tight → Bitcoin -65% - Now: Fed loosening → Bitcoin…?
2026 Implications:
IF liquidity continues (expected): - Lower borrowing costs - Easier credit - Risk-on sentiment - Institutional capital deploys - Bitcoin benefits
IF liquidity reverses (unlikely): - Tightening returns - Risk-off - Bitcoin struggles
Analyst Consensus:
Bullish Camp: “First meaningful liquidity expansion since 2020. Risk-on phase beginning. Bitcoin to $120K-$200K in 2026.”
Skeptical Camp: “It’s just repos, temporary, not real easing. Don’t read too much into it.”
Realist Camp: “Direction matters more than size. Fed is ADDING liquidity, not draining. That’s bullish.”
The BTC/Gold Crucial Support Theory:
Ted Pillows (Market Expert): “BTC/Gold is now at a crucial support zone. The fractal looks pretty similar to the 2017-21 cycle. If the zone holds, liquidity could flow from the precious metal into the flagship crypto.”
Translation: Gold up +68%, Bitcoin down -6%. That divergence may REVERSE in 2026 as liquidity shifts from traditional safe havens back to risk assets.
The Bottom Line:
On the last day of 2025, the Fed injected $74.8B—the most all year.
This is bullish for 2026. Liquidity historically precedes Bitcoin rallies. Tax selling ends tonight. ETF inflows reversed yesterday. Crypto market cap broke downtrend.
2. PERPETUALS DEXS HIT $12.09 TRILLION - 65% IN 2025 ALONE
The Story EVERYONE Missed:
While we obsessed over Bitcoin’s negative close, decentralized perpetual exchanges quietly had their BREAKOUT YEAR.
The Numbers:
Total Cumulative Trading Volume: $12.09 trillion
2025 Volume: $7.9 trillion (65% of ALL-TIME volume in ONE YEAR!)
December Alone: $1 trillion
October: First month to hit $1T
What Are Perp DEXs?
Decentralized platforms for trading perpetual futures (like Bitmex/Binance, but on-chain, no KYC, no centralized risk).
Top Platforms: - Hyperliquid (leader, sometimes RIVALS Binance in volume!) - dYdX (OG, been around since 2021) - GMX (Arbitrum-based) - Gains Network (Polygon-based)
Why This Matters:
2021: Perp DEXs were experimental, low volume
2023: Hyperliquid emerged, changed game
2025: Now processing TRILLIONS in volume
Cointelegraph: “This concentration highlights how rapidly onchain derivatives scaled in 2025. In December alone, perpetuals trading volume reached $1 trillion, carrying momentum that started in October.”
The Implication:
DeFi is EATING CeFi’s lunch.
When Hyperliquid can match Binance’s volume WITHOUT: - KYC/AML requirements - Custodial risk - Censorship risk - Geographic restrictions
That’s a paradigm shift.
2026 Outlook:
If perpetuals continue scaling: - HYPE (Hyperliquid token): Could 5-10x - dYdX: Potential 3-5x - GMX: 2-4x
DeFi Perps could be 2026’s surprise narrative.
3. TRUMP MEDIA TO ISSUE CRYPTO TOKEN - MEME MEETS REALITY
The Wildcard:
Trump Media (Truth Social parent) announced it will issue a new digital token on Crypto.com’s Cronos blockchain.
Details scarce, but: - Shares rose on announcement - CRO (Cronos token) jumped +1.4% - Distribution planned to shareholders
Why This Matters:
If Trump (or Trump-affiliated companies) issue tokens, it legitimizes crypto AT THE HIGHEST POLITICAL LEVEL.
Imagine: - Trump campaigns on “America’s Crypto President” - Millions of MAGA supporters buy crypto - Retail FOMO returns
2026 Potential: This could be the retail catalyst that’s been missing.
II. 2026 DEEP DIVE - THE YEAR AHEAD COMPREHENSIVE OUTLOOK
THE 2026 LANDSCAPE: REGULATION, ETFS, ADOPTION & CATALYSTS
After surviving 2025’s first negative post-halving year, what does 2026 actually look like?
Here’s the COMPLETE picture: regulatory environment, ETF evolution, institutional adoption, technological developments, and macro catalysts.
A. REGULATORY ENVIRONMENT 2026
The GENIUS Act (Passed 2025):
Congress passed comprehensive stablecoin regulation in 2025. This provides federal clarity for payment stablecoins, eliminating a major regulatory overhang.
What’s Coming in 2026:
1. Market Structure Legislation (HIGH PROBABILITY)
Grayscale Prediction: “Congress will pass bipartisan crypto market structure legislation in 2026, cementing blockchain-based finance in U.S. capital markets and facilitating continued institutional investment.”
What This Means: - Clear rules for crypto exchanges - Custody standards for institutions - Tax clarity (wash sale rules, staking income treatment) - Removes regulatory uncertainty that plagued 2025
Timeline: Q1-Q2 2026 (election-year Congress wants wins)
Impact: BULLISH. Regulatory clarity = institutional confidence = capital inflows
2. SEC Under New Leadership
Trump administration’s crypto-friendly stance means: - Less enforcement actions - More approvals for ETF products - Clearer guidance on token classifications
What Changed: From “regulation by enforcement” (Gensler era) to “regulation by collaboration”
Impact: BULLISH. Reduces legal risk, enables innovation
3. Strategic Bitcoin Reserve (POSSIBLE)
Trump floated idea of US government holding Bitcoin as strategic reserve asset.
If happens: - Legitimizes Bitcoin at sovereign level - Other countries follow (game theory) - Massive demand shock (government buying)
Probability: 30-40% (political will exists, execution uncertain)
Impact IF happens: EXTREMELY BULLISH. Target: $150K-$250K
4. Global Regulatory Coordination
MiCA (EU): Already in effect, provides framework
Japan: Crypto-friendly, considering further easing
Hong Kong: Opening to crypto
Dubai: Full embrace, becoming hub
Trend: Developed nations EMBRACING crypto with clear rules, not banning
Impact: BULLISH. Global legitimacy increases
B. ETF EVOLUTION 2026
Current State (End 2025): - Bitcoin ETFs: $34B total inflows (73% was IBIT alone) - Ethereum ETFs: Launched mid-2025, underperformed - Total AUM: ~$70B Bitcoin, ~$10B Ethereum
What’s Coming in 2026:
1. Altcoin ETFs (CONFIRMED)
Already Approved/Launching: - Solana ETFs (multiple issuers filed) - XRP ETFs (speculation high post-Ripple victory) - Index ETFs (baskets of cryptos)
SEC’s generic listing standards (Sep 2025) opened door for ETFs beyond BTC/ETH.
Impact: Legitimizes major altcoins, new capital channels
Winner: SOL, XRP if ETFs approved (could rally 50-100% on news alone)
2. Staking ETFs
2025 introduced: ETFs that STAKE the underlying assets, generating yield
2026 expansion: More ETFs add staking, compete on yield
Why This Matters: ETH staking yields ~3-4%. Institutional investors LOVE yield. ETFs that stake = more attractive than just holding spot.
Impact: BULLISH for ETH. More ETH locked in staking = less circulating supply
3. ETF Inflow Reversal
Base Case: After -$3.1B December outflows, January sees REVERSAL
Why: - Tax selling ends (mechanical pressure gone) - Fresh capital (new year, new allocations) - Fed liquidity ($74.8B+ injections) - FOMO if Bitcoin breaks $95K-$100K
Historical: January typically strong for crypto (post-tax reset)
Target: +$500M to +$1B weekly inflows Q1 2026
Impact: Price follows flows. If ETFs buying, Bitcoin up.
4. Institutional Adoption Accelerates
2025 Milestones: - ETFs absorbed $34B - DATs (Digital Asset Treasuries like MSTR) added 42K BTC in Nov-Dec alone - Total institutional holdings: ~$220B
2026 Catalysts: - 401(k) plans: Trump executive order allows Bitcoin in retirement accounts (trillions in potential capital) - Endowments: Yale, Harvard testing crypto allocations (copycat effect) - Sovereign Wealth Funds: Middle East, Asia exploring BTC - Corporate Treasuries: More companies follow MSTR playbook
Grayscale: “New capital entering crypto ecosystem will come primarily through spot ETPs.”
Impact: VERY BULLISH. Institutional capital = $10s of billions in 2026
C. TECHNOLOGICAL DEVELOPMENTS 2026
What’s Actually Being BUILT:
1. DeFi Growth
2025 Highlights: - DeFi lending (Aave, Morpho) saw “meaningful growth” - Decentralized perps (Hyperliquid) hit $12.09T cumulative volume (65% in 2025 alone!) - Stablecoins grew to $200B+ market cap
2026 Outlook: - Hyperliquid and other perp DEXs challenge centralized exchanges - Aave, Morpho become viable alternatives to TradFi lending - Tokenized real-world assets (RWAs) explode (stocks, bonds, real estate on-chain)
Grayscale: “Look for more DeFi protocols to integrate with traditional fintechs to benefit from their infrastructure and installed consumer base.”
Impact: DeFi tokens (AAVE, UNI, LINK, HYPE) could outperform in 2026
2. Layer 2 Scaling
Problem: Ethereum fees still high during congestion
Solution: Layer 2s (Arbitrum, Optimism, Base) handle transactions cheaper/faster
2025: Layer 2 activity SURGED, sometimes exceeding Ethereum mainnet
2026: Continued migration to L2s
Impact:
- Bearish for ETH fees (revenue goes to L2s not mainnet) - Bullish for L2 tokens (ARB, OP) - Neutral-Bullish for ETH (more usage overall, even if off main chain)
3. AI x Crypto
Emerging Narrative: AI agents that transact in crypto, AI-generated NFTs, decentralized AI compute
Projects: Bittensor (TAO), Render (RNDR), Fetch.ai (FET)
2026 Potential: If AI hype continues (and it will), AI crypto tokens could be 2026’s narrative leaders
Impact: Speculative but high upside. TAO, RNDR could 3-10x if narrative catches fire
4. Privacy Coins Comeback
2025 Surprise: Zcash (ZEC) led privacy sector in “breakout year”
Cointelegraph: “Led by Zcash, the privacy space had a breakout year in 2025. What’s coming next?”
2026 Outlook: If surveillance increases (CBDC fears, government overreach), privacy coins gain appeal
Impact: ZEC, XMR could outperform
5. Bitcoin Upgrades (Maybe)
Taproot Assets, Lightning Network improvements: Make Bitcoin more programmable, faster for payments
IF adopted widely: Bitcoin becomes more than “digital gold”—becomes actual CURRENCY
Impact: Long-term bullish, but 2026 impact likely minimal (adoption slow)
D. MACRO CATALYSTS 2026
The Big Picture Forces:
1. Federal Reserve Policy
Current: 3 rate cuts in 2025 (75 bps total), now at 4.25-4.50%
2026 Outlook: - Base Case: 2-3 more cuts (50-75 bps) by mid-year - Bull Case: 4-5 cuts (100-125 bps) if recession fears - Bear Case: 0-1 cuts if inflation re-accelerates
Grayscale: “The Fed cut rates 3x in 2025 and is expected to keep reducing rates next year. A supportive macro backdrop may limit downside risks to token prices in 2026.”
Historical: Last 2 cycle peaks occurred during Fed TIGHTENING. This cycle? Fed is EASING. That’s different (and potentially bullish).
Impact: More cuts = more liquidity = Bitcoin up
2. Recession Risk
Probability: 35-40% (elevated but not consensus)
IF recession: - Traditional view: Risk-off, Bitcoin down - 2026 view: Bitcoin might decouple as “non-sovereign store of value” during fiat crisis
Wildcard: If recession + Fed prints heavily, Bitcoin could MOON (2020 playbook)
Impact: Uncertain. Could go either way.
3. U.S. Election (November 2026)
Midterms. If Trump’s party loses Congress, crypto-friendly legislation stalls.
But: 2026 is PRE-election, so Congress wants wins. Crypto bill likely BEFORE midterms.
Impact: Neutral to slightly bullish (legislation front-loaded)
4. Geopolitical Tensions
2025: Russia-Ukraine, Middle East, China-Taiwan all simmering
2026: If escalates, traditional safe havens (gold) benefit. Bitcoin’s response? Unclear (historically volatile during crises).
Impact: Unpredictable. Bitcoin has NOT proven itself as safe haven yet.
5. Debasement / Fiscal Crisis
The Big One.
U.S. Debt: $36 trillion and climbing
Deficit: $2 trillion/year
Interest Payments: Now largest federal expense
IF fiscal crisis hits: - Dollar weakens - Inflation re-accelerates - Hard assets (gold, Bitcoin) surge
Bitcoin’s Thesis: This is EXACTLY what it was designed for
Probability: Low in 2026 (crisis builds slowly), but trend is clear
Impact: Long-term VERY bullish. Short-term, unlikely to matter in 2026.
E. PRICE PREDICTIONS 2026 - THE FULL SPECTRUM
BITCOIN:
Bear-Neutral ($75K-$85K): - Range-bound consolidation year - Fed cuts slowly, liquidity weak - No major catalysts - Probability: 20%
Base Case ($95K-$130K): - Tax selling ends → ETF inflows return - Fed cuts 2-3x → liquidity improves - Regulatory clarity → institutions deploy - Break $100K Q2, rally to $120K-$130K by year-end - Probability: 45%
Bull Case ($140K-$180K): - Everything in base case + Strategic Bitcoin Reserve OR major country adoption - Fed cuts aggressively (recession response) - FOMO returns, retail enters - Peak $160K-$180K Q4 - Probability: 15%
Moon Case ($200K+): - Multiple black swan positives (Strategic Reserve + country adoption + fiscal crisis + ETF mania) - Arthur Hayes scenario - Probability: 5%
ETHEREUM:
Bear: $2,200-$2,600 (follows BTC down)
Base: $3,500-$4,200 (moderate growth, staking narrative)
Bull: $4,500-$5,500 (ETF inflows, L2 growth, staking adoption)
ALTCOINS:
If ETFs approved: - SOL: $180-$250 (currently $125) - XRP: $3.00-$4.50 (currently $1.84)
AI Narrative Leaders: - TAO (Bittensor): 3-5x potential - RNDR (Render): 2-4x potential
DeFi Blue Chips: - AAVE: 2-3x - UNI: 1.5-2.5x - LINK: 2-3x
Privacy: - ZEC: 2-4x if privacy narrative accelerates
F. THE KEY QUESTION: IS THE CYCLE DEAD OR DELAYED?
This determines EVERYTHING.
Cycle Delayed Camp (60%):
Thesis: Cycle is INTACT but TIMELINE shifted. With institutional adoption, cycles take LONGER. 2025 was pre-peak chop, 2026 is ACTUAL peak year ($120K-$180K).
What happens: Q1-Q2 consolidation, Q3-Q4 explosive rally, peak late 2026
G. WILD CARDS & BLACK SWANS
Things that could change EVERYTHING:
Positive: 1. Strategic Bitcoin Reserve (US gov buys BTC) → +50% instant 2. Major country adoption (Dubai makes BTC legal tender) → +30-40% 3. Apple/Amazon treasury (tech giant buys BTC like MSTR) → +25% 4. Fiscal crisis (dollar collapse fears) → +100%+ 5. ETF mania (inflows exceed $10B/month) → +50-75%
Negative: 1. Quantum computing breakthrough (can break Bitcoin encryption) → -50% 2. Major hack (exchange/ETF security breach) → -20-30% 3. Government ban (China-style, but from G7 country) → -40% 4. MSTR liquidation (forced to sell holdings) → -15-25% 5. Fed U-turn (unexpected tightening) → -20%
Grayscale on Quantum: “Near-term concerns about quantum computing are overdone. U.S. market structure legislation will be the dominant force, not quantum fears.”
Why More Bullish Than 2025:
✅ Liquidity returning (Fed $74.8B injection, QT ended)
✅ Tax selling ends tonight (mechanical pressure gone Jan 1)
✅ Regulatory clarity coming (market structure bill Q1-Q2)
✅ ETF inflows likely reverse (Dec 30 already saw +$355M)
✅ Institutional adoption accelerating (DATs, 401(k)s, sovereign wealth)
✅ Hash rate capitulation (77% win rate historically for rallies)
✅ Historical patterns (down Christmas Eves → +126% next year)
✅ VanEck buying (smart money accumulating)
✅ Cycle likely delayed not dead (2026 = real peak year)
✅ Fed cutting (2-3 more cuts expected)
Why Still Risks:
❌ Pattern broken (first negative post-halving year = unprecedented)
❌ Gold still dominating (BTC/Gold support needs to hold)
❌ Recession possible (35-40% odds)
❌ No new narratives (still “digital gold” which failed 2025)
❌ Correlation with Nasdaq (if tech weak, BTC weak)
Final Verdict:
2026 will be BETTER than 2025. Whether that means or $150K or $200K is the question. But barring black swan negative, Bitcoin should close 2026 higher than it opens.
VII. KEY TAKEAWAYS - LESSONS FROM 2025
1. FIRST NEGATIVE POST-HALVING YEAR = HISTORIC
Bitcoin closes 2025 down -6% to -7% YTD. Every previous post-halving year (+5,428%, +1,331%, +59.8%) closed green. The 12-year pattern broke. This matters. Either: (A) Cycle dead (new era), or (B) Cycle delayed (peak 2026). We’ll know in 12 months.
2. FRONT-RUNNING CHANGES EVERYTHING
ETFs launched Jan 2024, institutions bought BEFORE halving (April 2024). By Oct 2025, price already peaked. Then: crash. Lesson: When new capital channels exist, old patterns may not apply. Cycles can be front-run.
3. BITCOIN = NASDAQ BETA, NOT GOLD
Correlation with Nasdaq: 0.82 (near-perfect). Correlation with gold: -0.15 (negative). “Digital gold” narrative FAILED. When tech weak, Bitcoin weak. When gold up, Bitcoin flat. Bitcoin = risk-on tech asset, NOT safe haven. Accept it.
4. TAX HARVESTING IS REAL AND MECHANICAL
9 consecutive days of Asian rallies getting sold in US hours. Why? Tax-loss harvesting. US investors selling crypto losers to offset gains. This was MECHANICAL, not sentiment. Ends Jan 1. Expect Q1 reversal.
5. ETF FLOWS DRIVE PRICE (BOTH WAYS)
+$34B inflows Jan-Oct = Bitcoin to $126K. -$3.1B outflows Dec alone = Bitcoin to $88K. When marginal buyer (ETFs) becomes marginal seller, price goes down. Simple. Watch ETF flows in 2026 for direction.
6. HISTORICAL PATTERNS STILL MATTER (MAYBE)
Down Christmas Eves: 3 for 3 on +126% avg next year. Hash rate down: 77% win rate +72% in 6 months. Longer cycles (18-year real estate, Benner) point to 2026 peak. Do old patterns work in new era? TBD.
7. 2026 IS MAKE OR BREAK FOR BITCOIN THESIS
If Bitcoin rallies to $120K-$150K in 2026: Cycle delayed not broken, bulls vindicated, institutional adoption validated.
If Bitcoin dumps to $65K-$75K in 2026: Cycle broken, bears correct, narrative needs reset.
HAPPY NEW YEAR, REKT REPORTS FAM! 🎆
May your 2026 be: - Greener than your 2025 - More profitable than gold/silver - Less correlated with Nasdaq - Full of $90K breakouts - Blessed with ETF inflows - Graced with Saylor’s infinite conviction - And ultimately, the year we were promised 2025 would be
DISCLAIMER: This newsletter provides market analysis and trading intelligence for informational and educational purposes only. It is NOT financial advice. Cryptocurrency trading carries substantial risk of loss. Past performance does not guarantee future results. Always conduct your own research, understand the risks, and never invest more than you can afford to lose. The Rekt Reports and its authors are not registered financial advisors. Trade responsibly.
