Crypto sentiment turns bearish as holiday liquidity shrinks and institutions withdraw｜Frontier Lab…

Crypto sentiment turns bearish as holiday liquidity shrinks and institutions withdraw｜Frontier Lab Crypto Weekly

Market Overview

Market Conditions

This week, the cryptocurrency market showed a volatile downward trend, with both BTC and ETH experiencing choppy declines. The market sentiment index dropped sharply from 41 last week to 23, officially entering bearish territory.

Stablecoin Market Dynamics

The total market capitalization of stablecoins continued to rise. Although the overall market cap increased week over week, the growth was relatively modest, characterized by an increase in USDT while USDC remained flat:

• USDT: Market capitalization reached USD 186.5 billion, up 0.43% WoW. While net inflows persisted from last week, the scale of inflows was limited to approximately USD 800 million, indicating continued caution among non-U.S. investors.
• USDC: Market capitalization stood at USD 78.0 billion, unchanged WoW, suggesting that U.S. Investors also maintained a cautious stance this week.

Analysis of Market Drivers

Institutional Flows Turn Net Negative

BTC and ETH spot ETFs, along with publicly listed treasury companies, recorded higher selling than buying this week, reversing the previous accumulation trend. This shift reflects increasingly cautious investor sentiment, with institutional capital beginning to exit risk assets.

Diverging U.S. Labor Data

U.S. November unemployment rose to 4.6%, exceeding expectations of 4.4%, signaling increased pressure in the labor market and reinforcing expectations for Fed rate cuts in 2026. Meanwhile, seasonally adjusted non-farm payrolls exceeded expectations at 64,000 (vs. 50,000 expected), significantly improving from the prior -105,000 reading. This was largely driven by multiple-job holding, indirectly pointing to rising recession risks.

Inflation Data Supports Rate-Cut Expectations

U.S. seasonally adjusted CPI YoY for late November declined to 2.7%, below the expected 3.1%, marking the first time reaching this level since 2021. This further strengthened expectations for Federal Reserve rate cuts in 2026 and provided short-term support to market sentiment.

Ongoing Concerns Over AI Infrastructure Commercialization

The negative impact of Oracle’s weaker-than-expected earnings continued to unfold, reigniting concerns that the monetization cycle for AI infrastructure may take longer than anticipated. This triggered broad profit-taking across risk assets, leading to widespread price pullbacks.

Policy Expectations and Regulatory Developments

Bank of Japan Rate Hike Materializes

The Bank of Japan implemented a widely expected 25 bps rate hike. Although fully priced in by markets, the resulting global liquidity drain still exerted pressure on risk assets, intensifying selling momentum.

Christmas Holiday Liquidity Concerns

As markets approach the Christmas holiday period, trading volumes are expected to decline. Investors tend to reduce exposure ahead of the holidays, and the natural contraction in liquidity increases the risk of heightened price volatility.

Macro Data Vacuum

Next week marks the final full trading week of 2025, with virtually no major macroeconomic data releases scheduled, creating a “macro data vacuum” and leaving markets without clear directional guidance.

Key Events to Watch Next Week

Start of the “Christmas Trading Period”

Markets are entering the typical “Christmas trading” phase, characterized by sharply reduced liquidity and lower trading activity. Price volatility may increase, and the risk of sudden declines driven by liquidity shortages should be closely monitored.

Institutional Buying Power as a Key Variable

Treasury companies and spot ETFs shifted to net outflows this week. Their buying power often follows market trends, but under holiday liquidity constraints, the sustainability of institutional demand remains highly uncertain.

Amplified Risks During the Data Vacuum

In the absence of macroeconomic catalysts, market sentiment and technical factors will dominate price action. Any negative news could trigger outsized and unexpected market reactions.

Market Outlook

High Probability of Further Declines

Considering institutional net outflows, holiday effects, tightening liquidity, and accumulating bearish sentiment, the market is highly likely to experience further downside next week. Investors should prepare defensively.

Elevated Liquidity Risk

During the Christmas holiday period, liquidity is expected to deteriorate significantly. Combined with uncertain institutional demand, market depth will weaken, increasing the likelihood of abnormal price swings.

Maintain a Highly Cautious Stance

Given the shift in institutional flows, holiday-driven liquidity contraction, and the macro data vacuum, investors are advised to remain highly cautious, strictly manage risk exposure, and prioritize defensive positioning to guard against potential short-term market sell-offs.

Next Week’s Bearish Watchlist

Bearish Assets: XPL, AXL, EDU

XPL: Stablecoin Public Chain Ecosystem Collapse

A comprehensive breakdown of the stablecoin public-chain ecosystem, with TVL plunging 49% and an upcoming unlock of 88.88 million tokens triggering a liquidity crisis.

Project Fundamentals and Positioning

Plasma is a high-performance Layer 1 blockchain purpose-built for stablecoin payments, aiming to address four major pain points in current stablecoin transfers: high transaction fees, poor user experience, low abstraction of functionality, and slow settlement speeds. Its core objective is to deliver low-latency, high-throughput performance to meet the stringent requirements of financial infrastructure.

Severe Deterioration in Fundamental Metrics

• TVL Continues to Collapse: Plasma’s total value locked has fallen sharply from its peak of USD 6.358 billion to USD 3.141 billion, representing a 49.41% decline. This indicates sustained capital outflows from the Plasma ecosystem and large-scale user exits on-chain.

• Sharp Contraction in Stablecoin Scale: As a specialized stablecoin public blockchain, Plasma has seen on-chain stablecoin market capitalization plunge from a peak of USD 6.186 billion to USD 1.843 billion, representing a decline of 70.21%. This reflects an accelerated outflow of stablecoin liquidity from the Plasma network.

• Severely Depressed On-Chain Trading Activity: Plasma’s average daily DEX trading volume has collapsed from a peak of USD 352 million to approximately USD 10 million, a decline of 97.15%. This directly indicates extremely weak on-chain trading activity and very low user participation.

• Significant Decline in Gas Fee Revenue: Recent average daily gas fee revenue has fallen to around USD 200, marking a sharp decline and indicating a severe reduction in on-chain activity, with network utilization approaching near-freeze levels.

• Continued Cross-Chain Capital Outflows: As a core metric for payment-focused blockchains, Plasma’s cross-chain TVL has declined from a peak of USD 13.319 billion to USD 6.834 billion, a drop of 48.68%, signaling persistent cross-chain capital withdrawal.

• Broad-Based Decline in User Activity: Based on a comprehensive review of on-chain metrics, user activity across the Plasma ecosystem is in broad decline, with the on-chain ecosystem now in a state of deep contraction.

Token Unlock Risk Assessment

• Unfavorable Unlock Size and Timing: On December 25, 88.88 million XPL tokens are scheduled to be unlocked. The timing is extremely unfavorable, as a large-scale unlock is set to occur while project fundamentals continue to deteriorate.
• Severely Insufficient Market Absorptive Capacity: XPL’s average daily trading volume is only around USD 12 million, indicating that market liquidity is clearly insufficient to effectively absorb the upcoming token unlock, which is expected to generate significant selling pressure.
• Weak Liquidity Depth: The relatively low daily trading volume reflects shallow market depth, limiting the market’s ability to cushion the price impact of the token unlock. As a result, selling pressure is likely to transmit directly to price levels.

Summary

The Plasma project is facing multiple systemic risks. On the operational front, TVL has contracted by 49.41%, stablecoin market capitalization has plunged by 70.21%,the average daily DEX trading volume has collapsed from USD 352 million to approximately USD 10 million (a 97.15% decline), cross-chain TVL has fallen by 48.68%, and user activity across the ecosystem has broadly declined. On the capital side, the upcoming unlock of 88.88 million XPL tokens on December 25 is set to generate substantial selling pressure in a market with weak liquidity and an average daily trading volume of only USD 12 million. The convergence of these negative factors poses sustained downside pressure on the price of XPL, making a near-term trend reversal highly unlikely.

AXL: Lagging Technical Roadmap Combined with Deteriorating Fundamentals, Token Unlock Triggers Multiple Bearish Catalysts

Project Fundamentals and Positioning

Axelar is a project designed to enable seamless interoperability between blockchains. By building a universal overlay network, it connects different blockchain ecosystems, applications, assets, and users, thereby enabling Web3 interoperability. Simply put, Axelar functions as a bridge that allows information and assets to flow freely across different blockchains, while also supporting cross-chain smart contract execution and decentralized applications.

Deteriorating Market Environment

• Lagging Technological Iteration in the Cross-Chain Sector: The cross-chain sector is evolving toward an intent-centric architecture, while Axelar’s development remains confined to a traditional interoperability layer. This places Axelar behind the industry’s latest technological trends and exposes it to the risk of being marginalized as technical paradigms shift.
• Pronounced Winner-Takes-All Effect and Marginalized Competitive Position: Due to elevated security risks in the cross-chain sector, users tend to gravitate toward leading projects. Axelar currently holds only 0.51% market share in the cross-chain space, far below market leader LayerZero’s 36.53%, placing it at a clear competitive disadvantage.

Severe Deterioration in Fundamental Metrics

• Sharp TVL Contraction: Since April, Axelar’s TVL has been in a pronounced downward trend, with a cumulative decline of 87.46%. This reflects sustained capital outflows, alongside a significant drop in project attractiveness and usage.

• Depressed Transaction Activity: Axelar’s daily transaction volume has fallen to near-zero levels. For cross-chain projects, daily transaction volume is a core indicator of ecosystem activity, and current data suggests critically insufficient usage frequency.

• Minimal Market Share: Axelar accounts for less than 1% of total transaction volume across the cross-chain sector. In a market where user preference strongly favors leading projects, this leaves Axelar in an extremely unfavorable competitive position.

Token Unlock Risk Assessment

• Unfavorable Unlock Size and Timing: On December 26, 13.5 million AXL tokens will be unlocked, representing 1.1% of the total locked supply. The unlock occurs at a critical juncture when project fundamentals continue to deteriorate and the broader crypto market remains under pressure, creating adverse implications for price performance.
• Insufficient Market Absorptive Capacity: AXL’s average daily trading volume is only around USD 1.4 million. Relative to the unlock size of 13.5 million tokens, market liquidity is clearly insufficient to effectively absorb the additional supply, resulting in significant selling pressure.

• Strong Selling Incentives Among Unlock Recipients: Based on the linear vesting schedule, this unlock primarily involves early investors and the project team. Given the project’s current downtrend, these holders have strong incentives to monetize their positions and are highly likely to sell upon unlock.
• Weak Liquidity Depth: The relatively low daily trading volume reflects shallow market depth, limiting the market’s ability to absorb price shocks triggered by large-scale token unlocks.

Summary

Axelar is facing multiple layers of systemic bearish pressure. On the technology front, its development trajectory lags behind industry trends, exposing the project to marginalization risk. From a market perspective, its share within the winner-takes-all cross-chain sector remains minimal, resulting in a marginalized competitive position. Operationally, TVL has declined by 83.37% and daily transaction volume has fallen to near zero. On the capital side, the upcoming unlock of 13.5 million AXL tokens on November 26 is set to generate selling pressure in a market with weak liquidity and an average daily trading volume of only USD 1.4 million. The strong monetization incentives among investors and the project team further amplify downside risk. The convergence of these negative factors places sustained downward pressure on the price of AXL.

EDU: Niche-Sector Project Facing Multiple Challenges and Token Unlock Pressure

Project Fundamentals and Positioning

Open Campus is a decentralized education project aimed at reshaping the creation, distribution, and accessibility of educational content through blockchain technology. It provides a platform for educators, content creators, parents, and students to foster a more open and equitable education ecosystem. Open Campus allows educators to monetize their content through sales and sharing, while creators use Publisher NFTs to grant promotional rights and generate revenue for co-publishers.

Severe Deterioration in Fundamental Metrics

• Complete Stagnation in User Growth: The number of new EDU token holders has effectively stalled, with only nine new holders added recently. This clearly indicates that the project has entirely lost its ability to acquire new users. For any blockchain project, user growth is a core indicator of health. Prolonged zero growth signals that the project has entered a death spiral with no visible signs of recovery.

• Core Feature Usage Falls to Zero: OC Genesis NFTs, which serve as the platform’s core functional vehicle, have seen their recent trading volume drop to zero. This indicates that no users are actively sharing educational content on the platform, rendering the project’s core value proposition completely ineffective. The total abandonment of this core functionality not only reflects severe user attrition but also exposes a fundamental failure of the project’s business model.

• Extremely Low User Engagement: EDU’s weekly active wallets stand at only 114, with a portion likely belonging to market maker wallets. Actual user participation is therefore negligible. Compared to healthy projects that typically record thousands or even tens of thousands of active wallets, this stark contrast underscores the loss of the user base and the near-complete stagnation of the ecosystem.

• Zero Growth in NFT Holders: The absence of any new OC Genesis NFT holders over the past six months further confirms the comprehensive contraction in project usage. As NFT ownership is a key indicator of user engagement in Web3 projects, the stagnation in holder growth directly reflects a total collapse in project attractiveness and user confidence.

Token Unlock Risk Assessment

• Extremely Thin Daily Trading Volume: EDU’s average daily trading volume is only around USD 800,000, a level that is severely inadequate in the current cryptocurrency market. Compared to mainstream tokens that often trade tens or even hundreds of millions of dollars per day, EDU’s liquidity is critically insufficient, limiting effective entry and exit for investors and significantly amplifying investment risk.
• Insufficient Market Absorptive Capacity: Relative to the upcoming unlock of 21.01 million tokens, the existing average daily trading volume of USD 800,000 is clearly incapable of absorbing potential selling pressure of this magnitude. This severe supply–demand imbalance is likely to trigger sharp price volatility and expose holders to substantial downside risk.
• Significant Unlock Size: On December 27, 21.01 million EDU tokens will be unlocked, accounting for 2.1% of the total locked supply. Against a backdrop of deteriorating fundamentals, this unlock is expected to generate substantial selling pressure. Given the project’s current state of decline, such a large unlock would further accelerate the downward price trend.
• Strong Selling Incentives Among Unlock Recipients: This unlock primarily involves early investors and the project team. As the project has clearly entered a downcycle, these stakeholders have strong incentives to liquidate their positions. Unlike retail investors, institutional holders prioritize liquidity and returns, and in the face of a deteriorating outlook, they are highly likely to sell aggressively to limit losses — thereby creating sustained selling pressure on the market.

Summary

The Open Campus project is facing multiple layers of systemic risk. On the operational front, user growth has completely stalled (only nine new EDU token holders), core feature usage has fallen to zero (OC Genesis NFT trading volume at zero), user engagement is extremely low (only 114 weekly active wallets), and NFT holder growth has stagnated (no new holders over the past six months), leaving the ecosystem effectively at a standstill. On the capital side, the upcoming unlock of 21.01 million EDU tokens on December 27 will introduce significant selling pressure into a market with weak liquidity and an average daily trading volume of only USD 800,000. The unlock represents 2.1% of total locked supply, and strong liquidation incentives among investors and the project team further amplify downside risk. The convergence of these negative factors places sustained downward pressure on the price of EDU, with the project having entered a death spiral that is unlikely to reverse in the near term.

Token Unlock Schedule Next Week (Unlock Value > $1 Million)

Market Sentiment Index Analysis

The market sentiment index plunged from 41 to 23. BTC declined by 3.35% this week, ETH fell by 8.15%, and TOTAL3 dropped by 7.99% over the same period, indicating that the overall altcoin market has entered bearish territory.

Major Crypto Events to Watch Next Week

• Tuesday (December 23): The U.S. Bureau of Economic Analysis releases Q3 GDP data.
• Wednesday (December 24): U.S. initial jobless claims for the week ending December 20.

Sector Performance

Based on weekly returns, the CeFi sector performed the best, while the AI sector performed the worst.

• CeFi Sector: In the CeFi sector, BNB, CRO, MNT, OKB, and BGB accounted for a large proportion, totaling 97.83%. Their declines this week were -2.56%, -6.12%, -8.71%, -5.28%, and -3.25%, respectively. Most CeFi projects experienced smaller declines compared to other sectors, making CeFi the best-performing sector.
• AI Sector: In the AI sector, TAO, RENDER, WLD, FET, and FARTCOIN accounted for a large proportion, totaling 85.37%. Their weekly declines were -19.71%, -17.26%, -12.05%, -13.09%, and -17.62%, respectively. AI projects across the board experienced larger declines than projects in other sectors, resulting in the AI sector being the worst-performing sector.

Summary

This week, the cryptocurrency market exhibited a volatile downward trend. BTC and ETH declined by -3.35% and -8.15%, respectively, while the market sentiment index plunged from 41 to 23, entering the bearish zone and indicating a clear weakening of market sentiment. Changes in stablecoin market flows reflected cautious investor sentiment: USDT market capitalization grew slightly by 0.43% to USD 186.5 billion, continuing net inflows but at a modest scale of only USD 800 million, reflecting relative caution among non-U.S. investors; USDC market capitalization remained stable at USD 78 billion, indicating that U.S. Investors also adopted a conservative strategy this week.

The core driver of this week’s market decline was net outflows of institutional funds, with spot ETFs and treasury companies showing more selling than buying. Combined with the mixed impact of U.S. employment data, concerns over AI infrastructure commercialization, and the Bank of Japan’s rate hike, the market faced complex downward pressure.

Although favorable inflation data supporting interest rate cuts provided some market support, investors still need to be highly alert to liquidity risks during next week’s Christmas holiday. The market is entering the typical “Christmas rally” period, with sharply reduced liquidity, lower trading activity, and potentially heightened price volatility. Additionally, next week is the last full trading week of 2025, with virtually no major macroeconomic data releases, forming a “macro data vacuum” and leaving the market without clear directional guidance. Of particular concern is the uncertainty around the sustainability of institutional buying power. Its fluctuations often follow market trends, and in the context of holiday liquidity contraction, any negative news may quickly trigger risk-off behavior, forming a negative feedback loop.

Considering the current market environment, investors are advised to adopt a highly cautious and defensive strategy. Given institutional fund outflows, Christmas holiday effects, liquidity contraction, and recent negative sentiment, the market is very likely to experience further declines next week. Investors should closely monitor changes in institutional buying power and market liquidity, as these factors will directly determine market direction. In the current complex market environment, maintaining a highly cautious approach, strictly controlling risk exposure, and preparing defensive measures are essential to manage potential short-term sharp market drops.