Bitcoin Leads Crypto Markets Lower as Tax-Loss Selling Weighs on Stocks

Bitcoin pulled crypto markets down on Tuesday, slipping about 1% over the past 24 hours to just below $88,000. The decline came despite record highs for gold, silver, and copper earlier in the day, which eased slightly in afternoon trade. U.S. stocks moved modestly higher, with the Nasdaq up 0.45%.

Crypto-related stocks, however, experienced sharper losses than Bitcoin’s modest pullback might suggest. The year’s worst performers—digital asset treasury companies—took the biggest hits. Strategy (MSTR) fell 4.2%, XXI (XXI) dropped 7.8%, ETHZilla (ETHZ) sank 16%, and Upexi lost 9%. Other notable decliners included Gemini (GEMI), Circle (CRCL), and Bullish (BLSH), all down roughly 6%.

Analysts at digital asset hedge fund QCP Capital pointed to tax-loss harvesting as a key factor driving year-end volatility, particularly in illiquid market conditions. This strategy involves investors selling losing positions to realize losses and reduce tax liabilities.

“The end of the year typically sees portfolio managers trimming risk assets, not only because of upcoming holidays but also to manage taxable events and balance sheets that, in some cases, prefer not to show cryptocurrency holdings,” explained Paul Howard, senior director at trading firm Wincent.

QCP also highlighted a continued drop in open interest across BTC and ETH perpetual futures—falling by about $3 billion and $2 billion, respectively—reducing leverage and leaving crypto markets more exposed to large swings.

“This vulnerability is heightened by Friday’s record Boxing Day options expiry, which represents over 50% of Deribit’s total open interest,” QCP said in a morning note. “While downside positioning has eased, the persistence of $100,000 calls suggests residual, if cautious, optimism for a Santa rally.”

Despite the short-term volatility, QCP expects any sharp moves to fade into the new year. “Holiday-driven moves have historically mean-reverted, with price action often softening as liquidity returns in January,” the firm noted.

Looking ahead, Howard anticipates continued consolidation, with no immediate catalyst to recover losses from early October highs. “It will be many months before the asset class retraces to a $4 trillion market cap from the current $2.6 trillion,” he said.

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Trump Urges Fed to Lower Rates Amid Strong Economic Growth

U.S. President Donald Trump, in a post on Truth Social on Tuesday, reiterated his demand that the next Federal Reserve chairman—whom he is reportedly close to selecting—lower interest rates even when the economy is performing well.

“I want my new Fed Chairman to lower Interest Rates if the Market is doing well, not destroy the Market for no reason whatsoever,” he wrote.

The post coincides with data from the Bureau of Labor Statistics showing inflation-adjusted GDP growth at a 4.3% annualized pace in Q3, indicating a strong economy.

“In the old days, when there was good news, the Market went up. Nowadays, when there is good news, the Market goes down because everybody thinks Interest Rates will be immediately lifted to take care of ‘potential’ Inflation,” Trump added.

On Tuesday, both the S&P 500 and Nasdaq posted gains, but lingering inflation concerns and expectations of only limited rate cuts in the new year continue to keep investors cautious.