Bitcoin Flash Crashed on Christmas Eve, Losing the "Christmas Rally" and Set to Record Its Worst Quarterly Performance in Three Years

Since retreating from its historical high in October, bitcoin has fallen by about 30%, marking its worst quarterly performance since the collapse of TerraUSD and Three Arrows Capital in the second quarter of 2022.

Written by: Bao Yilong

Source: Wallstreetcn

As traditional financial markets experience a year-end rally, bitcoin not only missed out on the "Christmas rally" but also experienced a rare flash crash on Binance.

On Wednesday evening during the US session, bitcoin on the Binance BTC/USD1 trading pair suddenly flash crashed from $87,600 (UTC+8) to $24,100 (UTC+8), plunging over 70%, before quickly rebounding to around $87,000 (UTC+8) within seconds.

This dramatic volatility was limited to USD1, a stablecoin issued by World Liberty Financial, which is supported by the Trump family, and did not occur in other major trading pairs.

Currently, bitcoin's price is hovering around $87,000 (UTC+8), stuck in the $85,000 to $90,000 (UTC+8) range, with a cumulative decline of over 7% this year. Since retreating from its historical high in October, bitcoin has fallen by about 30%, marking its worst quarterly performance since the collapse of TerraUSD and Three Arrows Capital in the second quarter of 2022.

This asset, known for its high volatility and speculative sentiment, has unexpectedly stagnated at the end of the year, in sharp contrast to the repeated record highs of the S&P 500 Index and gold.

Liquidity Shortage Triggers Technical Flash Crash

Analysts pointed out that this "flash candle" was typically triggered by a lack of liquidity or display issues.

Emerging or low-volume stablecoin trading pairs often lack market makers providing dense quotes, resulting in shallow order book depth. A large market sell order, forced liquidation, or automated trading can quickly break through the buy side, causing the price to temporarily deviate from the true market level.

Cryptocurrency analyst and Coin Bureau co-founder Cryptonews stated:

This highlights the risks of executing trades on illiquid pairs, especially when stablecoin trading paths are still in the liquidity-building phase. Many spot investors found their positions were almost unaffected 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.

Temporary pricing issues caused by widened spreads, faulty market maker quotes, or trading bots reacting to abnormal quotes can also trigger such price dislocations. During thin trading periods, this effect is amplified due to fewer participants to absorb order flow and restore price balance.

Missing the "Christmas Rally" and Diverging from Gold

In stark contrast to bitcoin's sluggish performance, traditional markets are sending completely different signals.

US stocks are experiencing a typical "Christmas rally," with the S&P 500 Index closing at a record high of 6,921.42 points on December 24 (UTC+8). Tech stocks and momentum trades have once again rewarded retail investors who held their positions.

Gold has also performed impressively, with spot gold prices hitting a record high of $4,525.18 per ounce on December 24 (UTC+8). Although it subsequently pulled back, its annual gain still exceeds 70%, poised for its best annual performance since 1979 and the second-strongest annual increase in over a century.

Spot gold has risen over 70% so far this year

Bitcoin, however, has missed out on both ends. For a period at the start of 2025, bitcoin's trend was highly synchronized with risk assets, but it clearly lagged behind in the year-end rally.

Its long-touted "digital gold" attribute also failed to attract the defensive capital inflows that drove gold prices higher. Timothy Misir, Head of Research at digital asset research firm BRN, stated:

"Hard assets" are attracting capital as long-term hedging tools, while crypto assets remain marginalized.

Historically, bitcoin's performance during the "Christmas rally" has been inconsistent.

Although it recorded gains of 33% and 46% during the Christmas-to-New-Year period in 2011 and 2016, it fell by 14% and 10% in 2014 and 2021, respectively. Since 2011, bitcoin's average gain during the Christmas period has been 7.9%.

Technical Deterioration and Lack of Buying

Some market inertia stems from technical factors.

Bitcoin has fallen below the 365-day moving average of about $102,000 (UTC+8), a level that served as key support in this cycle. Failure to reclaim this threshold increases the risk of a deeper correction.

On December 26 (UTC+8), more than $2.3 billion in options will expire, freezing directional bets and reinforcing the stalemate. Thin holiday liquidity has further weakened market activity. But these factors only highlight a deeper absence: there are no obvious buyers willing to step in.

Continued selling by long-term holders is another drag.

Pratik Kala, portfolio manager at hedge fund Apollo Crypto, said bitcoin's price action this year has been "clearly out of sync with the extremely bullish news cycle surrounding the asset."

He attributed this gap to continued selling by early holders, including the sharp pullback in October, which together prevented the rebound from gaining momentum.

Kala said that most of the selling pressure now appears to have subsided, leaving bitcoin in a consolidation range, which he believes could lay the foundation for stronger performance next year.

Continued ETF Outflows

As traders enter the Christmas holiday, market liquidity has declined and risk appetite has weakened, with spot bitcoin and ethereum ETFs seeing further outflows on December 24 (UTC+8).

According to SoSoValue data, spot bitcoin ETFs recorded a net outflow of $175 million on Wednesday, while spot ethereum ETFs saw an outflow of $57 million.

The largest single-day outflow came from BlackRock's IBIT, 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 $52.7 million that day, with Grayscale's ETHE dominating the selling pressure with an outflow of $33.78 million, bringing its historical cumulative net outflow to $5.083 billion.

This pattern is consistent with market norms during major holidays: trading volumes plummet, market-making desks reduce positions, and portfolio strategies shift to defense.

Konstantin Vasilenko, co-founder of Paybis cryptocurrency exchange, told the media that he does not expect a "Christmas rally."

For tax reasons, traders in some regions will use cryptocurrencies and exit some risk positions before the New Year, so he does not expect significant moves before January.

At present, as US stocks rise and gold shines, bitcoin's stagnation is sending its own signal: an asset built on excitement has nothing exciting to offer at the end of the year.