Bitcoin Dips Below $88,000 Amid Commodity Rally and Tax-Loss Harvesting Pressures

On Wednesday, December 25, 2025, amidst a general slowdown across global financial systems during the holiday period, the price of Bitcoin (BTC) experienced a modest decline, settling near the $87,702.81 mark. This downward movement in crypto contrasted sharply with the robust performance seen in commodities markets. Gold, silver, and copper all surged to new record highs. Analysts attributed this commodity strength to increased demand for inflation hedging strategies and a weakening U.S. dollar. Meanwhile, major U.S. stock indices, including the S&P 500 and the Nasdaq 100, concluded their trading sessions either slightly higher or at record levels, highlighting a clear divergence in asset performance as the year drew to a close.

The total valuation of the cryptocurrency market stood at approximately $2.6 trillion. Experts, including those at QCP Capital, anticipate a significant return of liquidity in January 2026, which could potentially reverse the current market trends. A particularly severe downturn was observed in the equities of companies closely tied to digital assets. Specifically, the so-called Digital Asset Treasury (DAT) firms based in the U.S. and Canada saw their median share prices fall by 43% across the entirety of 2025, positioning this asset class among the year's worst performers. For instance, shares of MicroStrategy Incorporated (MSTR) dropped by 4.2% during similar trading sessions, reflecting a broader investor rotation away from speculative crypto holdings toward more traditional, 'hard' assets.

This trend is amplified by the financial structure of many DATs, including MSTR, which had aggressively raised substantial capital throughout 2025—peaking in July—primarily to acquire tokens. The issue, however, is that these underlying assets generate no cash flow, while the companies are still burdened by outstanding debt obligations. Market fragility was further exacerbated by thin liquidity conditions and the looming expiration of a major derivatives event. Open interest in BTC perpetual futures saw a notable contraction, falling by roughly $3 billion, which indicated a deleveraging process underway ahead of the options expiry.

Looking ahead to Friday, December 26, a significant options expiration event was scheduled on the Deribit exchange, dubbed the 'Boxing Day' expiry. This event carried a notional value of $28.5 billion, representing more than half of Deribit's total open interest, with approximately $24.3 billion tied up in BTC contracts alone. Jean-David Péquignot, Deribit’s Chief Commercial Officer, confirmed this expiration as a record-setter. While volatility remained relatively muted, he suggested that a price level around the $85,000 strike price could act as a short-term gravitational anchor for the market.

On the macroeconomic front, lingering political tensions continued to shape expectations regarding future monetary policy. On December 23, former President Donald Trump publicly called upon the incoming Federal Reserve Chair to commit to interest rate reductions, irrespective of the economy's underlying strength, as part of his ongoing pressure campaign against the central bank. This occurred despite strong U.S. GDP growth of 4.3% reported for the third quarter and the Fed’s own decision in December to cut rates by a quarter of a percentage point—marking the third consecutive reduction.

The Federal Reserve, focused intently on keeping inflation near the 3% threshold, is proceeding cautiously despite political imperatives to boost employment figures. Portfolio managers, as noted by Paul Howard, Senior Director at Wincent, frequently reduce risk exposure during holiday periods due to standard year-end balancing maneuvers. He predicts further consolidation in crypto assets throughout the coming year. QCP Capital suggests that tax-loss harvesting is a likely contributor to the immediate selling pressure, yet the continued presence of calls positioned at the $100,000 strike suggests underlying optimism persists.

Overall, market observers anticipate a prolonged recovery period is necessary to surpass the October highs and reach the projected $4 trillion market capitalization target. In a year where DATs delivered the worst returns and Bitcoin erased all its gains from early 2025, the current price action clearly reflects the seasonal effect of tax-loss selling. Experts point out that this December phenomenon, where investors liquidate losing positions to offset capital gains, combines with thin liquidity and the impending options expiry to create an environment ripe for price choppiness, even given Bitcoin's relatively subdued movement over Christmas.