First Week of December: Crypto Assets Enter a High-Sensitivity Repricing Phase

The first week of December opened under a cloud of risk aversion as global macro conditions continued to tighten, pushing digital assets deeper into a liquidity-constrained environment. With the Federal Reserve adopting a more cautious communication tone and U.S. Treasury yields remaining elevated, crypto once again traded like a high-beta expression of global liquidity, reacting more to policy expectations and real-yield shifts than to sector-specific catalysts.

Bitcoin's inability to reclaim the US$90,000–92,000 resistance band highlighted a more structural recalibration underway. Unlike prior drawdowns driven by excessive leverage, this phase reflects institutional retrenchment, evidenced by slowing inflows, continued ETF redemptions, and a contraction in stablecoin liquidity across major venues. The market is now seeing fewer signs of forced deleveraging and more signs of deliberate de-risking, as allocators reprice digital asset exposure in line with a higher-for-longer global rates regime.

DeFi echoed the same caution. TVL contracted again across major ecosystems, with asset allocators migrating from structured yield and delta-neutral products into simpler, collateral-backed strategies. Against a backdrop of shrinking stablecoin supply and elevated funding rates, institutions appear to be prioritizing liquidity preservation over yield optimization. In essence, the market remains in reset mode, where direction is dictated less by narrative catalysts and more by the gravity of flows, liquidity, and macro uncertainty.

Key Market Review — Flows, Positioning & Institutional Behavior

Market Breadth: Narrow, Fragile & Flow-Driven

Market breadth deteriorated further through the first week of December. BTC traded in a compressed range of around US$88K–92K with low conviction, and altcoins experienced increasingly asymmetric drawdowns. Liquidity remained thin across top books, and depth-to-sell-off ratios showed that even moderate flows could trigger outsized moves.

The broader crypto market capitalization has remained below $3T since the October peak, with no meaningful uptick in retail or systematic inflows. Volatility continued to cluster, and option markets reflected persistent demand for downside protection. Across the board, market structure remains fragile, with price action heavily dependent on ETF flows and stablecoin liquidity.

ETF Flows Indicate a Clear Rotation Across Majors

Flows during this week suggest that the rotation theme is continuing, albeit with moderating outflows in BTC and slightly healthier inflows into select alt-products.

Institutional & Treasury Positioning: Cautious, Selective & Liquidity-Aware

Institutional desks entered December in deep capital-preservation mode.

• Corporate treasuries continue delaying major BTC accumulation, seeking macro clarity and improved liquidity conditions.

• Hedge funds have reduced net exposure, cutting leverage and repositioning toward basis trades and volatility capture.

• Market makers are running lighter inventories due to the spike in funding costs and the rise in cross-venue spread risks.

Despite the cautious picture, selective conviction remains:

• 
  ARK Invest continued building exposure across crypto-linked equities—including Coinbase, Bullish, and miners, signalling a contrarian long-term thesis.

• However, these actions remain isolated and modest compared to the broader institutional slowdown.

For now, capital is being preserved, not deployed, and the flows reflect hedged, selective participation rather than broad accumulation.

DeFi Overview — TVL Dynamics & Protocol Rotation

Data source: DeFi Total Value Locked https://defillama.com/

DeFi entered December under sustained pressure, with the sector shedding roughly US$55B in TVL since early October, which is around a 30% decline that largely mirrors the broader crypto drawdown rather than signalling mass capital flight. Much of the contraction reflects asset-price depreciation, not wholesale withdrawals, though flows do show a clear rotation away from high-leverage and complex strategies toward simpler, collateral-backed structures.

Ethereum remains the anchor of DeFi liquidity at US$70–75B TVL, while ecosystems such as Solana, Arbitrum, and BNB Chain have experienced double-digit TVL declines, underscoring a broader reduction in risk appetite. Within Ethereum, lending and liquid-staking platforms like Aave and Lido have seen inflows flatten, whereas restaking protocols such as EigenLayer and ether.fi continue to demonstrate relative resilience on the back of incentive-driven validator demand.

Structured and delta-neutral products are seeing diminished usage as stablecoin volatility and shrinking incentives that reduce their appeal. Meanwhile, stablecoin issuance itself is contracting, signalling tightening DeFi credit conditions across the board.

Overall, the trend is clear with DeFi undergoing a liquidity-led reset, capital rotating toward simpler, fully collateralized yield and away from leverage-dependent strategies. Stress is evident, but the underlying rotation suggests recalibration, not an abandonment of decentralized finance.

Funding Rate Snapshot — Leverage Rebuilding

Source: https://www.coinglass.com/AccumulatedFundingRate (The data is based on the last 7 days' funding rate taken snapshot on December 1, 2025)

The mismatch between positive funding and weak spot flows continues to be a structural risk.

Outlook for Next Week (Dec 8–14, 2025)

• U.S. Macro Data & Fed Signals

The coming week is macro-heavy, with U.S. CPI (Dec 11) and Initial Jobless Claims (Dec 12) taking center stage. These prints follow several weeks of tightening financial conditions and rising real yields, making them pivotal for global liquidity sentiment.

A hot CPI print—particularly in core services or shelter—would reinforce the Fed's cautious messaging from late November, pushing rate-cut expectations further out into 2026. Such a shift would likely tighten dollar liquidity and pressure risk assets, with crypto bearing the brunt as a high-beta macro proxy.

A cooler-than-expected CPI, combined with softer labour data, would ease yield pressures and could allow risk assets to stabilise. In crypto, this would likely support ETF flows and reduce forced deleveraging risks.

• ETF Flow Stabilization — The Most Immediate Market Signal

ETF flows remain the clearest forward-looking indicator for institutional sentiment. BTC and ETH spot ETFs have seen severe redemptions since mid-November, but flow velocity has started to slow.This week’s flows (Dec 8–14) are especially important for identifying whether the market is entering a:

• Prolonged outflow cycle: Which would imply continued derisking through year-end, new lows in liquidity, and shallow market depth; or

• Stabilization phase: Where redemptions slow, allowing price discovery to normalize and signalling early bottoming behaviour.

Flows from major issuers (BlackRock IBIT, Fidelity FBTC, Grayscale ETHE, VanEck HODL) will be closely monitored.

• Stablecoin Supply Growth — The Liquidity Pulse of Crypto

Stablecoins remain the cleanest, real-time indicator of crypto-native liquidity. Over November, USDT and USDC experienced net contraction, aligning with the broader unwind in DeFi and derivative leverage.For the week of Dec 8–14, the primary question is whether supply stabilizes or continues to shrink:

• Sustained contraction: Indicates that market-makers, whales, and OTC desks are still pulling liquidity. This caps upside across all assets.

• Resumption of net minting: Marks the first credible sign of a liquidity bottom, often preceding the earliest phases of risk re-engagement.

Watch Circle's weekly attestations and Tether's treasury wallet movements.

• DeFi Protocol Events & Restaking Catalysts

Several upcoming protocol events during Dec 8–14 may trigger capital rotation despite the weak macro backdrop:

• EigenLayer Phase-3 Restaking Expansion (Dec 9): enabling additional operator slots and pooled security expansion; this is historically correlated with inflows into LST and LRT assets.

• Base & Arbitrum Incentive Epoch Rotations (Dec 10–12): rotating incentives may drive short-term TVL inflows, particularly into yield-bearing perps DEXs and liquidity vaults.

• Lido Quarterly Operator Update (Dec 11): often influences LST yields and rebalancing behaviour.

While these catalysts are unlikely to reverse broader trends alone, they can spark localized rotation, especially into restaking-linked assets like ETH, stETH, eETH, and LRT governance tokens.

• Leverage & Liquidation Zones — The Near-Term Volatility Trigger

Funding rates remained elevated through early December, especially across BTC and SOL perps. With BTC trading around US$88K–91K, the market is sitting directly above a heavy cluster of long-leverage liquidation levels.Why it matters:

• A break below US$87K–89K could trigger cascading liquidations, as a significant percentage of open interest was built in this price band.

• Thin order books amplify wick risk, particularly during Asia and weekend trading hours.

• Elevated funding without spot confirmation remains a classic setup for volatility spikes.

• Liquidation cluster data from CoinGlass and Hyperliquid should be monitored throughout the week.

Positioning Summary

Given current conditions, the most prudent institutional strategy remains:

• Focus on liquid large-caps (BTC, ETH, SOL)

• Limit long-tail exposure

• Prioritize liquidity and risk-managed positioning

• Wait for confirmed flow reversals before scaling exposure

The market is still in a flows-over-narrative environment. Patience and disciplined positioning remain the edge.

Crypto Market Watch: Key Events & Liquidity Drivers This Week

Macro Events That Matter Most This Week

Source: https://www.investing.com/holiday-calendar/

Crypto-Specific Catalysts to Watch

Source: https://coinmarketcap.com/events/