Late-Cycle Shakeout for Crypto Bulls as 2026 Liquidity Expectations Rise

As the year 2025 comes to a close, cryptocurrency traders and investors are pondering whether the digital asset market is transitioning into a bear market or undergoing a late-cycle reset. These discussions are fueled by expectations surrounding quantitative easing (QE), global interest rate cuts, and the prospective implications of the U.S. CLARITY Act for 2026.

Key Takeaways

Cryptocurrency traders are evaluating whether the market has entered a bear phase due to ongoing price declines and regulatory uncertainties as 2025 ends.
Bitcoin, alongside other major cryptocurrencies, has seen significant price drops throughout the year, while only a few digital assets have made gains.
Divergence in monetary policies between countries, especially the U.S. and Japan, adds to the uncertainty in the market.
The upcoming CLARITY Act may provide clearer regulations for the cryptocurrency sector, potentially creating a more favorable environment for growth.

Crypto market weighs bear phase against 2026 QE and CLARITY hopes.

Current Market Overview

Traders in the cryptocurrency realm are grappling with uncertainties in the market as 2025 approaches its conclusion. There's growing speculation that the market is experiencing a bear phase, marked by ongoing price declines and potential regulatory changes anticipated in 2026.

Following the release of the U.S. Consumer Price Index and an interest rate cut from the Bank of England, Bitcoin fell below recent highs. The total market capitalization of cryptocurrencies dipped close to the crucial trillion-dollar mark before seeing a slight recovery.

Among the top 50 digital currencies with a complete year of price history, only Zcash, Monero, and Binance's BNB managed to record positive returns. Bitcoin has shown a year-to-date decline, with numerous other well-known cryptocurrencies also reflecting significant losses.

In the final quarter of the year, Bitcoin experienced a drop below a critical price level and has been trading within a range beneath that threshold. This breach of key support levels has led several analysts to adopt a bearish mid-term outlook for the cryptocurrency.

Market analyst Peter Brandt has forecast a potential severe downturn in 2026, suggesting a trend of diminishing returns with each bull run. He notes that past significant upward movements have been followed by notable corrections. Brandt believes the current parabolic price advance has been disrupted, indicating that a decline from all-time highs could lead to considerably lower price levels.

Monetary Policy Divergence

In a contrasting global monetary landscape, while the United States and the United Kingdom have enacted interest rate cuts, Japan has raised its rates to a five-year high. Such differing monetary policies introduce additional uncertainty in international markets, which could influence strategies like the yen carry trade—where traders borrow yen at low interest rates to invest in other higher-yielding assets.

According to market analysts, ongoing global economic uncertainties, compounded by the conflict in Ukraine and rising tensions between the U.S. and Venezuela, also impact sentiment in the cryptocurrency market.

Interestingly, the stablecoin market has significantly expanded over the past year, suggesting that liquidity is still present within the cryptocurrency ecosystem. The market has already priced in further interest rate cuts, which may continue to support Federal Reserve quantitative easing policies. Typically, periods of substantial QE contribute to increased liquidity in the market, and historical data shows that these eras often align with cryptocurrency bull runs.

Prominent industry figures, including the founder of Binance, endorse the idea of a potential supercycle, positing that 2026 might usher in a new cycle of quantitative easing. However, some investors argue that 2025 should not be labeled as a bull run due to the prevailing quantitative tightening measures throughout the year.

Legislative Developments

The White House has confirmed plans for the Senate to consider the Digital Asset Market CLARITY Act as early as January. This bill will enter the committee stage for discussion, amendment, and final approval before being voted on by the full Senate. Political observers indicate that the bill may pass.

The CLARITY Act intends to clarify the distinction between tokens considered securities versus those viewed as commodities, delineating the regulatory oversight between the Securities and Exchange Commission (SEC) and the Commodity Futures Trading Commission (CFTC). If passed, this legislation would offer cryptocurrency companies in the United States a more structured and transparent regulatory environment, moving away from the current model that relies on litigation to determine regulations.