Tom Lee says that the liquidation shock in October weakened market makers, leaving Bitcoin in a fragile and low liquidity environment ahead of December.
On-chain data shows that the 90-day CVD for Bitcoin has shifted from intense selling to neutral, indicating seller exhaustion.
Nexo's collateral trends reveal that long-term holders are borrowing against BTC, creating stability now but increasing the risk of liquidation if prices drop further.
Bitcoin may be approaching a critical December as liquidity conditions tighten and network indicators change. BitMine's Tom Lee stated that the market has been "paralyzed" since the liquidation shock on October 10, but argues that the current setup supports a significant move before year-end.
Recent on-chain trends and collateral data on exchanges indicate similar pressure forming beneath the surface.
Liquidity damage continues to define the market.
Lee told CNBC that the October event severely impacted market maker accounts.
Describing these companies as "the central banks" of digital currencies, responsible for depth, margin, and inventory. When their financial accounts shrink, liquidity contracts for weeks.
This matches market performance since early October. Bitcoin has dropped nearly 30% from its peak of $126,000.
Meanwhile, November delivered one of the worst monthly performances for both price and ETF flows in years.
Market makers pulled risk capital after a wave of liquidation wiped out around $19 billion from backed positions.
Order book depth has sharply declined across major exchanges, creating air pockets that increased downward movements. Under these conditions, Bitcoin and Ethereum tend to react earlier to macro pressures than stocks.
Despite this damage, Lee expects a strong recovery in December, pointing to the possibility of a dovish shift from the Federal Reserve.
Tom Lee said: "Bitcoin makes its best moves in 10 days every year; I believe some of these days will occur before the end of the year."
On-chain indicators show that sellers are losing control.
The CVD (Cumulative Volume Delta) for the 90-day futures recipient of Bitcoin has shifted from ongoing selling dominance to a neutral stance. The indicator tracks aggressive market orders on spot exchanges.
CVD (Cumulative Volume Delta) for the 90-day Bitcoin futures recipient. Source: CryptoQuant.
Red bars dominated from early September to mid-November, indicating ongoing selling pressure from traders. The recent movement suggests a quiet before a break in this pattern. It suggests that the aggressive phase of selling may have exhausted. However, it does not show strong buying dominance. Instead, the market has entered a typical balanced phase for bear markets late in the cycle. The price remains well below October levels, but the absence of ongoing selling pressure from traders indicates improved stability. The shift aligns with the broader reset of financial leverage observed in futures markets, where funding rates have moved close to zero.
Borrowing trends indicate strong hands, but with fragile leverage.
CryptoQuant data shows that Nexo users prefer to borrow against Bitcoin rather than sell it. BTC represents between 53% and 57% of all collateral on the platform. This range has been maintained for several months despite the decline.
This behavior reduces immediate selling pressure. It also confirms that long-term holders continue to treat Bitcoin as their primary source of liquidity. However, it adds another layer of weakness. If Bitcoin drops further, secured positions face liquidation risk. With thin order books gathering, any forced sale could lead to significant volatility. This dynamic reflects the fragility of the late bear phase rather than the strength of early bulls.
A market trapped between exhaustion and low liquidity.
The current market structure reflects a transition rather than a clear reversal. External ETF flows, liquidity damage, and macro uncertainty continue to pressure prices. However, on-chain selling is cooling, and structural holders are still defending positions. The result is an environment where small catalysts can produce large moves.
A report from Beincrypto stated that a dovish turn from the Fed would hit thin orders and accelerate recovery. Another major economic shock could renew leverage cuts. Lee's outlook aligns with this setup. The market has stopped bleeding, but it remains fragile. Bitcoin has a history of making significant moves in compressed periods, especially after aggressive liquidations.
As December approaches, both liquidity conditions and on-chain data suggest that the next big move is close. The direction will depend on macro signals and ETF flows rather than sentiment alone.
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