Bitcoin suffered a flash crash on Christmas Eve, losing its “Christmas rally,” and is set to post its worst quarterly performance in three years.
As the traditional financial markets welcomed a year-end rebound, Bitcoin not only lost the “Christmas rally” but also experienced a rare flash crash on Binance.
On Wednesday night during the US trading hours, Bitcoin suddenly flash-crashed from $87,600 to $24,100 on the Binance BTC/USD1 trading pair, plunging over 70%, and then rebounded rapidly to around $87,000 within seconds.
This sharp fluctuation was limited to USD1, a stablecoin issued by World Liberty Financial with support from the Trump family, and did not occur in other major trading pairs.
Currently, Bitcoin price hovers around $87,000, trapped within the $85,000 to $90,000 range, with a cumulative decline of over 7% this year. Since retreating from its historic high in October, Bitcoin has fallen about 30%, marking its worst quarterly performance since TerraUSD and Three Arrows Capital collapsed in Q2 2022.
This asset, famous for its high volatility and speculative sentiment, has stagnated unexpectedly at year-end, forming a sharp contrast with the repeated highs of the S&P 500 and gold.
Technical Flash Crash Triggered by Lack of Liquidity
Analysts pointed out that this “flash candle” was typically caused by insufficient liquidity or display issues.
Emerging or low-volume stablecoin trading pairs often lack market makers providing dense quotes, leading to shallow order book depth. A large market sell order, forced liquidation, or automated trading can quickly break through buy walls, causing prices to temporarily deviate from real market levels.
Crypto analyst and Coin Bureau co-founder Cryptonews said:
This highlights the risks of executing trades on pairs with insufficient liquidity, especially when stablecoin trading paths are still in the liquidity-building phase. Many spot investors found their positions barely affected before and after the flash crash.
He believes that in an environment of geopolitical uncertainty and fluctuating market liquidity, this is undoubtedly a warning against excessive leverage operations.
Temporary pricing issues from widened spreads, faulty quotes by market makers, or trading bot reactions to abnormal quotes can also trigger such price disconnects. During thinly traded periods, this effect is amplified due to fewer participants absorbing order flow and restoring price balance.
Missed “Christmas Rally” and Divergence with Gold
In stark contrast to Bitcoin’s sluggish performance, traditional markets are sending completely different signals.
U.S. stocks saw a typical “Christmas rally,” with the S&P 500 closing at a record high of 6,921.42 points on December 24. Tech stocks and momentum trades once again rewarded retail investors who stayed the course.
Gold also performed impressively, with spot gold hitting a historic high of $4,525.18 per ounce on December 24. Although it retreated later, annual gains still exceed 70%, on track for its best yearly performance since 1979, making it the second strongest annual gain in over a century.
(Spot gold has surged over 70% so far this year)
Bitcoin missed out on both ends. In early 2025, Bitcoin’s trend was once highly correlated to risk assets, but it clearly fell behind in the year-end rally.
Its long-touted “digital gold” property also failed to attract the defensive capital inflows driving up gold prices. Timothy Misir, Head of Research at digital asset firm BRN, said:
“Hard assets” are attracting long-term hedge capital, while crypto assets are still being marginalized.
Historically, Bitcoin’s performance during the “Christmas rally” has been unstable.
While it posted gains of 33% and 46% from Christmas to New Year in 2011 and 2016 respectively, it fell by 14% and 10% in 2014 and 2021. Since 2011, Bitcoin has averaged a 7.9% rise during Christmas periods.
Deteriorating Technicals and Lack of Buying
Some market inertia arises from technical factors.
Bitcoin has fallen below the 365-day moving average of about $102,000, a key support level in this cycle. Failure to reclaim this threshold increases the risk of a deeper pullback.
On December 26, over $23 billion in options will expire, freezing directional bets and reinforcing the impasse. The thin holiday liquidity further reduces market activity. However, these factors only highlight a deeper issue: there is no obvious appetite for buyers to enter.
Persistent selling by long-term holders is another drag.
Pratik Kala, crypto portfolio manager at Apollo Crypto hedge fund, said Bitcoin’s price action this year has “clearly decoupled from the extremely bullish news cycles surrounding the asset”.
He attributes this disconnect to ongoing sales by early holders, including the sharp retreat in October, and says these factors have prevented a rebound from gaining momentum.
Kala says most of the selling pressure now seems to have ended, leaving Bitcoin in a consolidating range. He believes this could lay the foundation for a stronger performance next year.
Continuous Outflows from ETFs
As traders entered the Christmas holiday, market liquidity dropped and risk appetite declined. On December 24, spot Bitcoin and Ethereum ETFs once again saw capital outflows.
According to SoSoValue data, spot Bitcoin ETFs recorded a net outflow of $175 million on Wednesday, while spot Ethereum ETFs saw $57 million in outflows.
The largest single-day outflow came from BlackRock’s IBIT fund, which lost $91.37 million, followed by Grayscale’s GBTC with a net outflow of $24.62 million.
Spot Ethereum ETFs had a net outflow of $52.70 million that day, with Grayscale’s ETHE leading the sell pressure at $33.78 million. Its historical total net outflow rose to $5.083 billion.
This pattern aligns with market norms during major holidays: trading volumes drop sharply, market makers reduce positions, and portfolio strategies turn defensive.
Konstantin Vasilenko, co-founder of crypto exchange Paybis, told the media, he did not expect a “Christmas rally.”
Due to tax reasons, traders in some regions move crypto and exit risk positions before the new year, so he does not anticipate major moves before January.
Right now, as US stocks rise and gold shines, Bitcoin’s stagnation is sending its own signal: an asset built on excitement, yet completely lacking any excitement at year-end.
Risk Warning and DisclaimerThe market has risks, investment must be cautious. This article does not constitute personal investment advice, nor does it consider the special investment goals, financial situations, or needs of individual users. Users should consider whether any opinions, views, or conclusions in this article suit their specific situation. Invest accordingly at your own risk.