Allegoria

🔥 1. Macro Factors
This is the biggest driver of money flowing out of risky assets like crypto:
Uncertainty in the US Fed's Interest Rate Policy:
The market is losing confidence in the possibility that the US Federal Reserve (Fed) will soon cut interest rates (high interest rates make holding non-yielding assets like Bitcoin less attractive).
This sentiment is causing investors to turn risk-off on a global scale, dumping speculative assets.
Concerns about the "AI Bubble":
Many analysts and major financial institutions are expressing concerns about the overvaluation of tech and AI stocks.
If the tech/AI bubble bursts, it will lead to a widespread decline in risky assets, and crypto (which is highly speculative) is one of the first assets to be sold off.
📉 2. Internal Causes of Crypto Market
Bitcoin Breaks Key Level:
Bitcoin fell below $90,000 for the first time in about seven months, wiping out all the gains it made since early 2025.
The breach of key psychological and technical support levels like $100,000 and $90,000 triggered stop-loss orders and caused panic.
Large Liquidations and Over-Leverage:
The crypto market remains dominated by margin trading positions. As prices fall, leveraged longs are liquidated en masse, forcing holders to sell assets, creating a chain reaction of selling pressure.
This liquidation wiped out billions of dollars in leveraged positions in just a few weeks.
Weak ETF Flows:
After a strong run-up in spot Bitcoin ETFs, the market has recently seen weak outflows or inflows, removing a previously important source of demand.
Short-Term Capitulation:
On-chain data shows that the majority of the selling is coming from new investors (holding coins for less than 3 months). They are selling at a loss out of fear, not because long-term investors are taking large profits.
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The Blockchain Association is pushing back against the latest cryptocurrency regulatory move of the United States Internal Revenue Service (IRS) with a joint lawsuit.

On Dec. 27, the IRS issued final regulations requiring brokers to report digital asset transactions, expanding existing reporting requirements to include front-end platforms, such as decentralized exchanges (DEXs).

Set to take effect in 2027, the rules mandate that brokers disclose gross proceeds from sales of cryptocurrencies and other digital assets, including information regarding taxpayers involved in the transactions.

In response to the new rules, the Blockchain Association and the Texas Blockchain Council filed a lawsuit against the IRS, announced Kristin Smith, the CEO of the Blockchain Association, in a Dec. 28 X post:

“Today we’re taking action, filing a lawsuit that argues today’s broker rulemaking violates the Administrative Procedure Act and is unconstitutional.”

“We stand with our nation’s innovators and will continue working to ensure the future of crypto – and DeFi – is here in the United States,” added Smith.

Source: Kristin Smith

Under the new rules, if a decentralized finance (DeFi) platform facilitates the exchange or sale of digital assets — even through smart contracts — and exercises sufficient control or influence over the transaction process, it could meet the definition of a broker.

The IRS’ rulemaking puts “unlawful compliance burgers on software developers” building front-end trading infrastructure, wrote the Blockchain Association.

Blockchain Association lawsuit against IRS. Source: theblockchainassociation.org

The decision raises significant concerns for blockchain software developers, considering that other code developers have already been sanctioned for how their software is being used.

Notably, Tornado Cash developer Alex Pertsev was found guilty of money laundering by Dutch judges at the s-Hertogenbosch Court of Appeal on May 14. He was sentenced to five years and four months for allegedly laundering $1.2 billion worth of illicit funds despite Tornado Cash being a non-custodial cryptocurrency mixer.

IRS’s new regulation is an “infringement” on privacy rights of DeFi users: legal expert

Some legal experts consider the IRS’ new rules to be an infringement of the privacy rights of DeFi users.

The IRS’ new definition of “broker” includes DeFi trading front-ends, which do not effectuate transactions, wrote Marisa Coppel, Head of Legal, Blockchain Association, adding:

“Not only is this an infringement on the privacy rights of individuals using decentralized technology, it would push this entire, burgeoning technology offshore. Blockchain Association continues to stand with the innovators and users of DeFi, and will continue to fight this misguided rulemaking…” 

The IRS’ rules will apply to digital asset sales starting in 2027. Brokers will need to begin collecting and reporting the necessary data for digital asset transactions starting in 2026. 

According to the IRS’ estimations, between 650 and 875 estimated DeFi brokers and up to 2.6 million US taxpayers will be affected by these final regulations. 

How Much Higher Will Bitcoin Go? | Mark Yusko’s 2025 Predictions. Source: YouTube

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