After experiencing a rapid plunge on "10/11" and facing consecutive blows from the U.S. government shutdown in November, the crypto market has become somewhat skittish.

What's even more anxiety-inducing is the serious divergence of opinions among traders and institutions regarding the market's future direction. Galaxy Digital just slashed its year-end target price from $185,000 to $120,000, but JPMorgan is still holding firm: Bitcoin could reach $170,000 in the next 6-12 months.

Ultimately, the most significant influencing factor of the crypto market's current volatility is liquidity. When U.S. dollar liquidity is ample, funds flow into risk assets, causing Bitcoin to surge; when liquidity tightens, funds retreat to government bonds and cash, causing Bitcoin to fall. This time, the U.S. government shutdown set a record, with the Treasury General Account balance nearing $1 trillion, effectively locking up liquidity and impacting almost all global financial markets. Bitcoin, of course, is no exception. This also underscores the fact that political factors largely influence liquidity.

With the Democratic Party's landslide victory in local elections on November 4, what will be the harbinger for the 2026 midterm elections? Will the Fed cut interest rates in December? Every recent move by the White House is worth a thorough analysis. Each event is changing liquidity expectations.

So how will Bitcoin fare in the closing days of 2025 and the upcoming 2026? Who's right and who's wrong in the bull vs. bear debate? BlockBeats has analyzed the arguments from both sides.

What Does the Bear Camp Say?

Before delving into the potential for an uptrend, let's first hear from the bear camp.

Democratic Counterattack, Trump Is Anxious

"The recent wins by the Democratic Party in several state elections are the reason for the crypto market's recent downturn. The Democratic Party is very unfavorable toward cryptocurrency and capitalism," analyst borovik.eth's viewpoint is not baseless.

Between the presidential election and the midterm elections, the U.S. has several key local executive elections. These localized elections can be seen as a vote of public satisfaction with the Republican Party or as a precursor to the midterms.

And recently, the Republican Party suffered three consecutive defeats at the state level, with the Democratic Party sweeping all victories:

1. Virginia Governor Election: Democratic candidate Abigail Spanberger won by a huge 15-point margin, becoming the state's first female governor. The Democratic Party not only secured the governorship but also regained three key positions of lieutenant governor, attorney general, and flipped at least 13 seats in the House.

2. New Jersey Governor Election: Democratic candidate Mikie Sherrill has also become the state's first female governor. New Jersey is a moderate stronghold, but this time the Democratic Party won by 13.8 percentage points, marking the largest victory since 2005.

3. California Passes Redistricting Election Vote: Potentially adding 5 House seats for the Democratic Party, allowing for the redrawing of 3 districts. Next, California Governor Newsom and others will become strong opponents against Trump and the Republican Party.

Newsom has consistently held the top spot for the 2028 Democratic presidential nomination on Polymarket.

4. New York City Mayor Election: 34-year-old Democratic candidate Zohran Mamdani easily won, receiving over 1.03 million votes, with a vote share of 52-55%. He becomes the first mayor in New York's history who is a member of Gen Z, the first Muslim mayor, and the first mayor of South Asian descent.

More importantly, New York's symbolism is extraordinary. Many of the votes supporting Mamdani came from young people who used to support Trump, earning him the nickname "left-wing Trump." This means that nearly 90% of young people in America's largest city and Trump's hometown have switched to the Democratic Party.

American governor and mayor elections are staggered to avoid the "down-ballot effect" of federal elections, allowing local voters to focus more on local issues. Governors mostly serve 4-year terms, but their election years vary by state; mayors serve terms ranging from 2 to 4 years, with more flexible election timing. However, precisely because they are staggered, these local elections have become important barometers of federal elections, often foreshadowing national political trends. Governors and mayors are also important sources of future federal candidates.

For the 2026 midterm elections, the Democratic Party's recent sweeping victories in state elections have provided strong momentum. Many foreign media and analysts view this as a precursor to a "blue wave" similar to 2017. This serves as a political warning to Trump that if he doesn't take action soon, he may repeat the scenario of losing control of the House, as happened during the local elections in 2017 during his first term.

In American politics, the first year of a presidency is often a honeymoon period, the second year is more challenging, and the following two years face further hurdles. But Trump probably didn't expect his honeymoon period to be this short and his losses to come this quickly.

Even though he currently controls both houses, Trump cannot have free rein indefinitely. The recent U.S. government shutdown is a prime example of this.

The core contradiction of this recent U.S. government shutdown can be simply put as follows: The Senate requires 60 votes to advance the government reopening, this is an iron rule. The Republicans wanted a Democratic vote, and the Democrats' condition was to extend an expiring healthcare subsidy, which President Trump disagreed with.

Under the leadership of minority leader Chuck Schumer, the Democrats rejected the vote 14 times, standing united like a family.

In contrast, the Republicans were filled with internal strife and discord. Trump repeatedly demanded breaking the rules to eliminate the 60-vote threshold, but was rejected by Senate Republican leaders, as they feared that abolishing obstructionist rules would backfire when the Democrats regained power. It is said that Trump was very angry, cursing these Republican leaders.

The ultimate result was a Republican compromise, where Trump was forced to accept a package deal that included Democratic priorities in exchange for reopening the U.S. government. This also clearly shows that the united Democrats have the ability to obstruct the Republican agenda, and Trump's control over both houses is being weakened.

This shutdown created the longest record in U.S. history, with a large number of federal employees on unpaid leave and many low-income people unable to receive subsidies, resulting in severe economic losses that significantly tarnished the Republican image.

Americans' dissatisfaction has reached a critical point. Livelihoods will always be the greatest political concern.

Dissatisfaction with living standards is indeed declining, dissatisfaction is rampant everywhere due to fear of illegal immigration, and various divisions are causing widespread anxiety. Millions of people from the upper-middle class realize they are experiencing social decline, which terrifies them.

Millions of people from the upper-middle class realize they are experiencing social decline, which terrifies them

Food inflation is also key; previously, $100 could buy what now costs $250, with worse quality. Just as the egg price surge has eased, America's beloved beef is facing a new wave of inflation.

The latest Consumer Price Index (CPI) released on October 24 showed that the price of roast beef and steak rose by 18.4% and 16.6% respectively year-on-year. According to data from the U.S. Department of Agriculture, retail ground beef prices have soared to $6.1 per pound, reaching a historic high. Compared to three years ago, beef prices have cumulatively risen by over 50%.

In addition, coffee prices rose by 18.9%, natural gas prices by 11.7%, electricity by 5.1%, and car repair costs by 11.5%. Many American young people struggling with college debt find themselves under increasing pressure due to further rising living costs.

The 2026 United States midterm elections are scheduled for November 3. Following the Democratic Party's significant victory in the 2025 gubernatorial elections, they have gained momentum to regain control of the House of Representatives. If the Democratic Party were to control both chambers of Congress in next year's midterm elections, the next two years for Trump would undoubtedly be full of constraints, turning him into a lame duck.

For the crypto market, increased regulation could lead those who had bet on Trump-friendly policies to rethink their strategy. The downward trend may not even need to wait until the midterm elections.

The December Rate Cut Is Not Set in Stone

What was originally a 90% probability of a rate cut at the December 10 Federal Reserve meeting has now dropped to 65% on Polymarket (51% at the time of writing).

The "Fed Whisperer" Nick Timiraos stated that four regional Fed presidents with voting rights (Boston Fed's Collins, St. Louis Fed's Mester, Chicago Fed's Evans, and Kansas City Fed's George, who voted against the rate cut decision in October) have not been actively pushing for another rate cut in December. Related Reading: "Fed Whisperer Analysis: Why Has the Road to Fed Rate Cuts Suddenly Hit a Roadblock?"

Fed officials are increasingly divided on the December rate cut. The hawks, who were previously focused on inflation concerns, are now advocating for a pause after the rate cut last month. Officials are divided on three critical issues:

First, is the cost increase due to tariffs truly one-off? Hawks are concerned that after absorbing the initial tariff costs, companies will pass more costs to consumers next year, further driving up prices. Doves believe that companies have so far been reluctant to transfer more tariff costs to consumers, indicating weak demand that is insufficient to support inflation.

Second, is the slowdown in monthly non-farm payroll growth due to weak labor demand or a shortage of labor supply due to reduced immigration? If it's the former, maintaining high rates will lead to an economic downturn; if it's the latter, a rate cut may overstimulate demand.

Third, are interest rates still restrictive to the economy? Hawks argue that after a 0.5 percentage point rate cut this year, rates are at or near a neutral level, neither stimulating nor restraining economic growth, thus posing a higher risk of further rate cuts. Doves believe that rates still have a restrictive effect and, without reigniting inflation, a rate cut can support labor market recovery.

In August, Powell attempted to calm this debate during his speech in Jackson Hole, Wyoming, where he argued that the impact of tariffs was only temporary and that the softness in the labor market reflected weak demand. As a result, he took a dovish stance and supported a rate cut. Data released a few weeks later confirmed his view: the economic slowdown had actually halted job growth.

However, at the meeting on October 29, the hawkish voices rose again.

Kansas City Fed President Jeff Schmid dissented from a rate cut that month. Several non-voting Fed bank presidents, such as Cleveland Fed President Beth Hammack and Dallas Fed President Lorie Logan, also openly expressed opposition to a rate cut.

During the post-meeting press conference, Powell bluntly stated that a rate cut in December was not a done deal. Therefore, it is currently difficult to predict whether the Fed will cut rates again at the meeting on December 9-10.

More importantly, Fed Chair Powell's term is also coming to an end. His term as Chair is set to conclude on May 15, 2026, and most analysts believe Powell will not risk appearing panicked. Maintaining the status quo is seen as the safest choice.

The dual uncertainty of politics and monetary policy is also putting the crypto market to a stress test.

Renowned analyst Willy Woo put forth a profound view: the two major forces that have historically driven Bitcoin's rise are gradually fading, and what will truly determine the market in the future will not be the halving or liquidity, but the macroeconomy itself.

For over a decade, Bitcoin's history has been almost entirely built on the "overlap effect of two four-year cycles": one being Bitcoin's halving cycle and the other the global liquidity (M2) cycle. Whenever the narrative of supply contraction due to halving intersected with the liquidity expansion driven by central banks, a strong resonance was formed — this was the underlying driver of the past two bull markets. However, with the cycles now out of sync, this resonance has disappeared, leaving only liquidity to act alone.

"The two previous real economic recessions, the bursting of the dot-com bubble in 2001 and the financial crisis in 2008, both occurred before Bitcoin's birth. This means we have never seen how Bitcoin would perform in a full economic recession."

Therefore, Willy Woo implied that the previous bull market era, driven by a double-cycle resonance, has ended. Bitcoin has lost its past "natural accelerator," and the drive for upward movement may be weaker, more reliant on external factors. The current trend of Bitcoin may have already given us an early indication that the "top is in."

Additionally, Galaxy Digital has recently revised down its Bitcoin price target. They have lowered their year-end target from $185,000 to $120,000, citing reasons such as large-scale selling by whales, fund rotation into gold and AI, and leverage liquidation. Galaxy's research lead, Alex Thorn, described this period as a "maturation phase" with lower volatility and institutional dominance in the market.

What Do the Bulls Say?

Of course, not everyone is pessimistic.

U.S. Government Opens Floodgates

Real Vision CEO Raoul Pal is optimistic that the crypto market will quickly recover from continued turmoil.

"The road to Valhalla is very close now," Pal said. In simple terms, Pal believes the crypto industry will soon start an upward trend after going through a series of market collapses.

Pal's logic is as follows: the U.S. government shutdown has indeed led to a liquidity squeeze. While tax revenues are still coming in, expenditures are zero. The Treasury General Account (TGA) balance is approaching $1 trillion, which is the main reason for the liquidity crunch and Bitcoin's underperformance compared to bonds.

But this is precisely the signal of a turning point. Related reading: "U.S. Government Set to Reopen, Bitcoin Finally Ready to Rally."

In response, the Federal Reserve has been forced to restart temporary repurchase operations (Overnight Repo), planning to inject nearly $30 billion of liquidity into the market.

More crucially, in the next phase, once the government shutdown ends, the Treasury Department will begin spending $250-350 billion in the coming months.

When this happens, quantitative tightening ends, and the balance sheet technically expands. This means that the crypto trajectory will gain free liquidity.

Historical trends also support this assessment. When the Treasury supplements reserves and liquidity becomes extremely tight, it often foreshadows a reversal. In other words, the current pain is the darkness just before dawn.

Raoul Pal also made an important point: "The four-year cycle is now a five-year cycle... Bitcoin should peak in 2026. Possibly in the second quarter."

This assessment directly addresses the bearish camp's concerns about "cycle resonance dissipation."

Pal's view is that the cycle has not disappeared but rather elongated. If the peak is in the second quarter of 2026, then the current position is actually a good time to get on board.

Moreover, even if liquidity alone is at play, it is enough to drive Bitcoin's rise—provided that liquidity is indeed expanding. The massive government spending after reopening is the beginning of liquidity expansion.

BitMEX co-founder Arthur Hayes also echoed similar sentiments. He linked Bitcoin's decline to an 8% decrease in U.S. dollar liquidity since July, suggesting that once the Treasury balance declines post-shutdown, dollar liquidity will rebound, propelling BTC higher.

In his latest content on Substack titled "Hallelujah," Hayes provided a deeper analysis: the U.S. will need to issue about $2 trillion in new debt annually in the coming years, in addition to rolling over old debt. With the declining purchasing power of the private sector and foreign central banks, RV funds will increasingly rely on SRF financing. This will force the Fed to continuously expand its balance sheet, leading to the effects of "stealth QE." Ultimately, the supply of dollars will continue to expand, which is the fuel for the rise in Bitcoin's price.

Therefore, Arthur believes that the current weakness in the crypto market is just temporary liquidity being locked up by the Treasury—during the government shutdown, the Treasury absorbed dollar liquidity through debt issuances but has not unleashed spending. When the government reopens, these funds will flow back into the market, and liquidity will loosen once again. Meanwhile, the market may mistakenly think this is the peak, leading to a Bitcoin sell-off, but that would be a "major misjudgment." The true bull market will reignite from the moment "stealth QE" begins.

JPMorgan analysts also remain bullish on Bitcoin, expecting the price to rise to $170,000 within the next 6 to 12 months as leverage in the futures market resets, based on a technical recovery.

The significant downturn in the past few weeks was largely caused by leverage liquidations. Once the leveraged positions are reset and the drag of excessive leverage is removed, Bitcoin becomes more poised for an upward move.

The Accelerating CLARITY Act

The second key reason for the bullish camp is the improving regulatory landscape, with the core of this improvement being the CLARITY Act.

Real Vision CEO Raoul Pal has emphasized repeatedly that establishing favorable crypto regulations will provide strong support for the market. His logic is simple: once the CLARITY Act is passed, banks and brokerages will receive regulatory clarity to custody and trade physically-backed crypto ETFs on a large scale.

The CLARITY Act was passed by the House of Representatives on July 17 and had bipartisan support, with 78 Democratic congressmen voting in favor. This number is crucial, indicating that the act is not merely a Republican wish but has a bipartisan foundation.

Then, on November 10, just two days ago, the Senate Agriculture Committee released a bipartisan discussion draft. This timing is delicate—coming right after the first major legislative progress post-government shutdown.

Released by the Senate Committee on Agriculture, Nutrition, and Forestry, chaired by John Boozman (R-Ark.) and senior member Cory Booker (D-N.J.), this once again shows bipartisan cooperation.

Market observers anticipate the act to be passed by the end of Q4 2025. The White House has a more specific target—legislation to be completed by the end of 2025.

Currently, the probability of the CLARITY Act (H.R.3633) passing in the "Which Bills Will Be Enacted by 2025?" market on Polymarket is 41%.

From July to November, it only took four months to progress from the House to the Senate discussion stage. This speed is not common in U.S. legislative history.

So, what does this act change? The most critical point: shifting primary regulatory authority of the spot digital commodity market to the CFTC, significantly reducing the SEC's jurisdiction.

Specifically, the CFTC gains exclusive jurisdiction over the spot digital commodity market, including mainstream assets like Bitcoin and Ethereum. This means CFTC can oversee digital commodity exchanges, brokerages, traders, and custodians, establish anti-manipulation standards, systemic safeguards, and risk management requirements. In contrast, the SEC loses exclusive oversight of security-type digital assets. The prior state of regulatory uncertainty reliant on enforcement actions is now definitively over.

The bill's handling of stablecoins is more subtle. It creates a special status for "Licensed Payment Stablecoins": the CFTC's regulatory oversight will only cover stablecoin transactions on registered platforms, including execution, solicitation, and acceptance. The issuer of the stablecoin is not regulated in terms of operations, reserves, or issuance processes. This complements the GENIUS Act (focused on issuer licenses and reserves), avoiding regulatory conflicts.

This design is quite clever. It separates the regulatory oversight of stablecoin transactional activities from issuance activities, avoiding the awkward situation of one asset being monitored by two agencies simultaneously. The market structure impact is direct; platforms must register with the CFTC to engage in stablecoin spot transactions, but issuers retain autonomy, avoiding overregulation.

This is a significant positive development for major stablecoins such as Ripple's RLUSD stablecoin, Circle's USDC, Tether's USDT, and so on.

Powell's Countdown

Ignoring Trump, Powell's term is entering its countdown phase, set to end on May 15, 2026, with six months remaining.

In the coming months, the market focus will be on the selection of the Federal Reserve Chairman. The government has narrowed down the list of candidates but has not yet announced a specific nominee.

Currently, the candidate with the highest probability on Polymarket is Hassett (Kevin Hassett), who served as the chair of the White House Council of Economic Advisers and has a close relationship with President Trump. Due to his position, he analyzed economic data for Trump almost daily, and Trump even referred to him as his "economics professor." Their policy philosophies align, with Hassett being a staunch dove who has long advocated for rate cuts to stimulate economic growth.

During Trump's first term, Hassett openly criticized Powell's rate hike policies, arguing that the Fed's aggressive monetary tightening would harm economic recovery.

This year, the Fed has faced unprecedented political pressure from the Trump administration for not cutting rates more aggressively. This political pressure is altering the power dynamics within the Fed, as evidenced by a recent example.

On November 13, according to the "Fed Oracle" Nick Timiraos, Atlanta Fed President Raphael Bostic suddenly announced that he would retire at the end of next February when his current five-year term expires. This announcement was somewhat delicate given the timing in December when rate cuts may occur.

After all, Bo Stick is one of the most hawkish generals within the Fed, and his departure will weaken the hawkish voice within the Fed during a politically sensitive period.

Futures market pricing indicates that by the end of 2026, the Fed will cut rates at least 4 times, by 25 basis points each time. If Hassert does become the Fed chair, coupled with the gradual decrease in hawkish voices within the Fed, undoubtedly, the speed and magnitude of rate cuts will exceed market expectations. Liquidity will be significantly unleashed, and risk assets will experience a strong rally.

For the crypto market, this is a very significant boon.

Another politically crucial event is Trump's efforts to mend fences with former allies. The signal came on November 4th, when Trump announced the re-nomination of Musk's friend, Isaacman, as the head of NASA.

After the announcement, Isaacman's friend and SpaceX CEO, Elon Musk, promptly retweeted the news.

Last December, Trump first nominated Isaacman as the head of NASA, but withdrew the nomination after a fierce quarrel with Musk over the "Beautiful Act" in May of this year, appointing Transportation Secretary Sean Duffy as NASA's acting director, which was seen as a warning to Musk. The two then fired salvos at each other, staging a "breakup of the century."

In August of this year, a turning point emerged. According to The Wall Street Journal, during the consideration of launching the "American Party," part of Musk's focus was on maintaining his relationship with Vice President Vance. Sources said Musk has been in contact with Vance in recent weeks. He admitted to his assistants that if he continued to push forward with the plan to form a political party, it would damage his relationship with Vance. Reports said Musk and his assistants have informed close associates that if Vance decides to run for president in 2028, Musk will consider using his huge financial resources to support him, which is indeed the best solution for Musk after returning to rational thinking.

In September, the media captured Trump and Musk appearing in the same frame and shaking hands at Charlie Kirk's memorial service, showing that their relationship has warmed. In fact, this is the case. Several U.S. media outlets reported that as Musk's relationship with the Republican Party warms up, Isaacman seems to be gradually re-entering the discussion on the nomination for NASA director.

Trump and Musk Engage in Heart-to-Heart at Kirk's Memorial Service

The November 4th re-nomination is another signal of reconciliation, and the timing is quite delicate, coming right after the Democratic Party's landslide victory in local elections.

The bearish camp sees Trump's declining approval rating, Republican compromises, and a bleak outlook for 2026. The bullish camp sees the Republican Party consolidating its power, repairing ally relationships, preparing to push through key legislation by the end of the year, and continuing to make waves for the 2026 midterm elections.

Uncertainty Itself is the Greatest Certainty

How high will Bitcoin rise? Traders and analysts have given different answers ranging from $120,000 to $170,000.

After reviewing all arguments from both the bear and bull sides, three viewpoints can be summarized.

First, focus on liquidity in the short term, regulation in the medium term, and the cycle in the long term.

If only the next few weeks are considered, the just-ended government shutdown, ongoing liquidity tightness, and escalating political uncertainty do indeed create pressure. Galaxy's year-end target of $120,000 may be a relatively conservative but realistic expectation.

However, looking at the next six to twelve months, a combination of large government spending, the passing of the CLARITY Act, and the unleashing of liquidity may drive the price closer to $170,000. JPMorgan's assessment has its rationality.

As for Raoul Pal's statement about reaching the peak in the second quarter of 2026, that is a longer-term cycle judgment. A five-year cycle replacing a four-year cycle—if this assumption holds true, now may actually be a good time to position oneself.

The key is to understand the trading timeframe. Short-term traders should focus on liquidity data and the progress of government spending, mid-term holders should keep an eye on the CLARITY Act and the change in the Federal Reserve leadership, and long-term investors should consider the business cycle and Bitcoin's fundamental positioning.

Second, political risk has been overestimated, but it should not be completely ignored.

The Democratic Party's victory in local elections does pose a threat to the 2026 midterm elections. However, there is a whole year from now until the midterms.

Many things can happen politically in a year. Trump's reconciliation with Musk, the Republican Party potentially pushing more favorable bills by the end of the year, and economic data improvements could also reverse public opinion.

More importantly, even if the Democratic Party regains control of Congress in 2026, a key crypto regulatory framework established in 2025 is unlikely to be overturned in the short term. The CLARITY Act received support from 78 Democratic Party members in the House of Representatives, indicating it has bipartisan backing.

The hallmark of U.S. politics is "a big ship is hard to turn around." Once a regulatory framework is set, even with a change in political parties, it is challenging to completely reverse course in the short term.

Therefore, the logic chain of betting on "Democratic Party victory leading to crypto doom" is oversimplified. Political risk exists, but it is not as lethal as imagined by the market.

What is truly concerning is political uncertainty itself. When the market is in a prolonged state of uncertainty regarding the outcome, funds tend to adopt a wait-and-see approach. This sense of caution may be more detrimental to the market than the victory of any one party.

Thirdly, the biggest risk is not political but economic recession.

The bearish camp's "business cycle" concerns, ironically, are the most significant risks to consider.

If the U.S. economy does enter a recession, will Bitcoin plummet like tech stocks or become a safe-haven asset like gold?

This question has no historical answer because Bitcoin has never experienced a full economic recession cycle. The dot-com bubble in 2001 and the 2008 financial crisis both occurred before Bitcoin's inception.

From the current data, signs of economic slowdown do exist: sluggish job growth, declining consumer spending, cautious corporate investment, and food inflation putting pressure on the middle class.

If these trends persist, the risk of a recession in 2026 is indeed possible. By then, liquidity release, regulatory friendliness, Trump-Musk reconciliation—all these factors may fail. Bitcoin will face a real stress test.

This is also why even though J.P. Morgan has set a $170,000 target, they also emphasize the "need for a leverage reset," and why Raoul Pal is optimistic about 2026 but acknowledges that "the market will be volatile until invisible QE starts." They are all waiting for a confirmation signal: Can the economy achieve a soft landing?

When will the government reopen? When will the CLARITY Act pass? Will the Federal Reserve cut rates in December? What will be the outcome of the 2026 mid-term elections? The answers to these questions will determine Bitcoin's short-term trajectory.

But the longer-term question is: How will Bitcoin perform in the next economic recession? This answer may not be revealed until 2026. Until then, traders will continue to debate, and the market will remain volatile. The only certainty is this: Uncertainty itself continues to be the greatest certainty.

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