Bitcoin Slips Below $88,000 as Year-End Tax-Loss Selling Weighs on Crypto Stocks

Bitcoin edged lower on Tuesday, extending its late-December weakness as year-end tax positioning and thin holiday liquidity weighed on crypto markets. The largest cryptocurrency by market value fell a little over 1% in the past 24 hours, trading just below the $88,000 mark.

The move came even as traditional markets showed relative strength. Gold, silver, and copper surged to record highs earlier in the session before paring gains, while U.S. equities traded modestly higher, with the Nasdaq advancing about 0.4%. In contrast, crypto-related equities suffered outsized losses, underscoring the pressure on digital asset-linked companies as the year draws to a close.

Crypto stocks fell much more sharply than bitcoin itself, with digital-asset treasury firms among the worst-performing equities in the sector this year. Strategy (MSTR) slid more than 4%, while XXI Holdings dropped nearly 8%. ETHZilla recorded the steepest decline, plunging by approximately 16%, and Upexi fell by about 9%. Other major crypto firms, including Gemini, Circle, and Bullish, were also down around 6%.

Market participants and analysts point to tax-loss harvesting as a key driver of the selling pressure. As the year ends, investors often sell losing positions to realise losses that can offset capital gains and reduce tax liabilities. This activity is typically amplified in December, particularly in markets with lower liquidity.

In addition to tax considerations, portfolio managers are trimming exposure to risk assets ahead of the holidays and year-end balance-sheet reporting. Some funds prefer not to include cryptocurrency holdings in year-end disclosures, further adding to selling pressure in an already thin market.

Derivatives data suggests that leverage in the crypto market has also been steadily declining. Open interest in bitcoin perpetual futures has decreased by approximately $3 billion, while Ethereum perpetual futures have declined by roughly $2 billion. The reduction in leverage has made markets more vulnerable to sharp price swings, especially during periods of low trading volume.

Attention is now turning to Friday’s Boxing Day options expiry, which represents more than half of Deribit’s total open interest. While downside positioning has eased somewhat, the continued presence of $100,000 bitcoin call options indicates lingering, albeit cautious, optimism for a potential year-end “Santa rally.”

Despite that optimism, analysts caution against expecting a sustained rebound before liquidity returns in the new year. Holiday-driven price moves have historically faded, with more stable trends emerging in January as participation increases.

Looking further ahead, market watchers expect a period of consolidation rather than a rapid recovery. With the total crypto market capitalisation currently estimated at around $2.6 trillion, analysts say it could take several months for the asset class to retrace toward the $4 trillion levels seen earlier in the year, absent a significant catalyst.

For now, crypto markets appear caught between tax-driven selling pressure and hopes for renewed momentum in 2026, with investors increasingly focused on when liquidity and risk appetite will return.