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 causing even more anxiety is the serious divergence of opinions on future market direction among traders and institutions. Galaxy Digital just slashed its year-end price target from $185,000 to $120,000, but JPMorgan Chase insists that Bitcoin could reach $170,000 in the next 6-12 months.

Ultimately, the most significant factor influencing the ups and downs of the crypto market right now is liquidity. When U.S. dollar liquidity is ample, funds flow into risk assets, and Bitcoin rises; 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, completely locking up liquidity and impacting almost all global financial markets. Bitcoin is certainly no exception. This also shows that, in fact, political factors largely influence liquidity.

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

So as we approach the end of 2025 and the imminent arrival of 2026, how will Bitcoin fare? Who is right and who is wrong in the bullish and bearish views? BlockBeats has compiled arguments from both sides.

What Do the Bears Say?

Before we analyze the potential for an upward move, let's first hear what the bears have to say.

Democratic Party Counterattack, Trump is Anxious

"The recent wins by the Democratic Party in several state elections are the reason behind the recent drop in the crypto market; the Democratic Party is very unfavorable towards cryptocurrency and capitalism," analyst borovik.eth's viewpoint is not groundless.

Between the presidential election and the midterm congressional elections, the U.S. has several critical local executive elections. These local elections can be seen as both a vote of satisfaction with the Republican Party by the American people and as a preview of the midterms.

Recently, the Republicans faced a three-game losing streak in state-level elections, with the Democrats winning across the board:

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

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

3. California Passes Redistricting Election Voting: Potentially adding 5 more House seats to the Democratic Party, they can redraw 3 districts. Next, California Governor Newsom and others will become Trump and the Republican Party's toughest opponents.

Newsom has consistently held the first place for the 2028 Democratic presidential nominee 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 voting rate of 52-55%. He became the first mayor in New York's history from the post-90s generation, the first Muslim mayor, and the first mayor of Indian descent.

Even more crucial is the symbolic significance of New York. Among the votes supporting Mamdani, many come from young people who once supported Trump, and he has also been nicknamed "the left-wing Trump." In other words, this largest city in America, Trump's old hometown, has seen nearly 90% of young people switch sides to the Democratic Party.

U.S. 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 have 4-year terms, but election years vary by state; mayors serve 2-4 years, with more flexible election timings. However, precisely because of this staggered approach, these local elections have become important barometers of federal elections, often foreshadowing national political trends. These governors and mayors are also important sources of future federal candidates.

For the 2026 midterm elections, the recent comprehensive victory of the Democratic Party in state elections has provided strong momentum, with many foreign media and analysts believing it is a precursor to a "blue wave" similar to 2017. This serves as a political warning to Trump. If he does not do something soon, he may replay the scenario of losing the House control in the first term due to local election failures in 2017.

In American politics, the first year in office is often a honeymoon period, the second year is the dislike period, and the next two years are usually lame-duck years. But Trump probably didn't expect his honeymoon period to be so short and his defeat to come so quickly.

Even though he still controls both chambers, Trump cannot have it all his way all the time. The recent U.S. government shutdown is a prime example of this.

The core contradiction of this recent U.S. government shutdown can be summed up as follows: The Senate requires 60 votes to move forward with reopening the government, and this is an iron rule. The Republican Party wanted a vote from the Democratic Party, and the Democrats' condition was to extend a soon-to-expire health insurance subsidy, but Trump disagreed.

Under the leadership of minority party leader Chuck Schumer, the Democratic Party refused to vote 14 times, standing united like a family.

In contrast, the Republican Party was full of infighting 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 the obstructive rules would backfire when the Democratic Party regained power. It is said that Trump was very angry and cursed these Republican leaders.

Ultimately, the Republican Party compromised, and Trump was forced to accept a package deal that included Democratic Party priorities in order to reopen the U.S. government. This also clearly demonstrates that the united Democratic Party has the ability to obstruct the Republican Party's agenda, and Trump's control over the two chambers is being weakened.

This shutdown created the longest record in U.S. history, with a large number of government employees on unpaid leave and many low-income individuals unable to receive subsidies, resulting in significant economic losses that severely damaged the Republican Party's image.

Americans' dissatisfaction has reached a critical point. Livelihoods will always be the top political priority.

Dissatisfaction with living standards is actually decreasing, dissatisfaction with cracking down on illegal immigration is causing widespread unease, and various divisions are making people very anxious. Millions of people from the upper-middle class have realized that they are experiencing social downward mobility and are feeling panicked about it.

Millions of people from the upper-middle class have realized that they are experiencing social downward mobility and are feeling panicked about it

Food inflation is also key. What used to cost $100 now costs $250, with even lower quality. Just as the egg price surge has eased, America's favorite beef is facing a new wave of inflation.

The latest Consumer Price Index (CPI) released on October 24 showed that the prices of roast beef and steak rose by 18.4% and 16.6% year-on-year, respectively. According to data from the U.S. Department of Agriculture, the retail price of ground beef has 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 rose by 11.7%, electricity costs rose by 5.1%, and car maintenance fees rose by 11.5%. Many American young people who are already burdened with debt from university education are facing even greater pressure due to further cost of living increases.

The 2026 U.S. midterm elections are scheduled for November 3. Following the Democratic Party's significant victory in the 2025 gubernatorial elections, they have gained strong momentum to reclaim control of the House of Representatives. If the Democratic Party were to control both chambers of Congress in next year's midterm elections, Trump's next two years would undoubtedly be full of constraints, rendering him completely ineffective.

For the crypto market, increased regulation may be on the horizon. This means that those who have bet on Trump-friendly policies will need to reconsider their direction, and the downward trend may not even wait until the midterm elections.

A December Rate Cut Is Not Set in Stone

The previously 90% probable rate cut at the December 10 Federal Reserve meeting has now decreased to 65% on Polymarket.

The "Fed Whisperer" Nick Timiraos stated that four voting regional Fed presidents (Boston Fed's Collins, St. Louis Fed's Muzinich, Chicago Fed's Gürkaynak, and Kansas City Fed's Schmidt, 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 Fed's Rate Cut Path Suddenly Hit a Roadblock?"

Fed officials are increasingly divided over a December rate cut. Hawks who were previously focused on inflation issues are now advocating for a pause after last month's rate cut. Officials are divided on three key 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 on more costs to consumers next year, further driving up prices. Doves, however, believe that companies have so far been reluctant to pass on additional tariff costs to consumers, indicating weak demand that is insufficient to support inflation.

Second, is the slowdown in monthly nonfarm payroll growth due to weak labor demand or a lack 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 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 that neither stimulates nor inhibits economic growth, making further rate cuts riskier. Doves believe that rates are still restrictive and, without reigniting inflation, a rate cut can support labor market recovery.

In August, Powell attempted to ease the debate during his speech in Jackson Hole, Wyoming, stating that the impact of tariffs was only temporary. He believed that the weakness in the labor market reflected soft demand, thus taking a dovish stance and supporting a rate cut. Data released a few weeks later confirmed his view: the economic slowdown had actually halted job creation.

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 opposed 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 chairmanship is set to conclude on May 15, 2026. Most analysts believe Powell will not risk appearing panicky and that maintaining the status quo is the safest choice.

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

Renowned analyst Willy Woo has put forward a profound viewpoint: the two main forces that have historically driven Bitcoin's price up are gradually fading away, and what will truly determine the market in the future is not the halving or liquidity, but the macroeconomy itself.

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

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

Therefore, Willy Woo implies that the bull market era, which was previously driven by a double-cycle resonance, has ended. Bitcoin has lost its past "natural accelerator," and the driving force behind its growth may be weaker, more reliant on external factors. The current trend of Bitcoin may have already indicated to us in advance that the "top is in."

Furthermore, Galaxy Digital has recently lowered its Bitcoin price target. They have reduced 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 assets, and leveraged liquidations. Galaxy's research head, Alex Thorn, described this period as a "mature era" characterized by lower volatility and institutional dominance in the market.

What Do the Bulls Say?

Of course, not everyone is pessimistic.

US Government Opening the Floodgates

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

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

Pal's logic is as follows: The US government shutdown has indeed caused a liquidity crunch. Taxes are still coming in, but spending is at zero. The Treasury General Account (TGA) balance is approaching $1 trillion, which is the main reason for the liquidity tightening and Bitcoin underperforming compared to bonds.

However, this is precisely the signal of a turning point. Related reading: "US Government Set to Reopen, Bitcoin Finally Set to Rise."

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

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

When this happens, quantitative tightening will end, and the balance sheet will technically expand. This means that the crypto track will gain free liquidity.

Historical trends also support this assessment. When the Treasury Department replenishes reserves and liquidity becomes extremely tight, it often signals an upcoming reversal. In other words, the current pain is the darkness before the dawn.

Raoul Pal also put forward 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 concerns of the bearish camp regarding "cycle resonance disappearance."

Pal's view is that the cycle has not disappeared but has lengthened. If the peak is in the second quarter of 2026, then the current position is actually a good entry point.

Moreover, even if liquidity alone is at play, it is enough to drive Bitcoin's rise — provided liquidity is indeed expanding. And the massive post-government-shutdown spending is the beginning of liquidity expansion.

BitMEX co-founder Arthur Hayes also echoed similar sentiments. He linked Bitcoin's decline to an 8% drop in USD liquidity since July, believing that once the Treasury balance decreases after the shutdown, USD liquidity will rebound, driving BTC higher.

In his latest content on Substack's "Hallelujah," Hayes provided a deeper analysis: The U.S. will have to issue about $2 trillion in new debt each year for the next few years, in addition to rolling over old debt. With decreasing purchasing power from the private sector and foreign central banks, the RV fund will increasingly rely on SRF financing. This will force the Fed to continue expanding its balance sheet, resulting in the effect of "stealth QE." Ultimately, the supply of the dollar will continue to expand, which is fuel for the rise in Bitcoin's price.

Therefore, Arthur believes that the current weakness in the crypto market is just liquidity temporarily locked up by the Treasury — during the government shutdown, the Treasury absorbed USD liquidity through debt issuance but has not yet released spending. When the government reopens, these funds will flow back into the market, once again easing liquidity. Meanwhile, the market may mistakenly think this is the peak, leading to Bitcoin sell-offs, but that will be a "major misjudgment." The real bull market will reignite from the moment the "stealth QE" begins.

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

The recent weeks' downturn was largely driven by leverage liquidations. Once the leverage reset is complete and the drag of excessive leverage is removed, Bitcoin is actually poised for an easier path to upside.

The Fast-Tracked CLARITY Act

The second key reason for the bullish camp is the improving regulatory environment, with the centerpiece being the CLARITY Act.

Real Vision CEO Raoul Pal has emphasized time and again that establishing favorable crypto regulation will provide a strong backbone for the market. His logic is simple: once the CLARITY Act is passed, banks and brokers will get the regulatory green light to mass custody and trade physically-backed crypto ETFs.

The CLARITY Act passed the House on July 17 and crucially had bipartisan support—78 Democratic representatives voted in favor, a key number signaling that this is not a one-party wish but a bipartisan grounding.

Then, on November 10, the Senate Agriculture Committee released a bipartisan discussion draft. The timing here is delicate—it is the first major legislative advancement post government shutdown cease.

The release came from the Senate Committee on Agriculture, Nutrition, and Forestry, led by chairman John Boozman (R-Ark.) and ranking member Cory Booker (D-N.J.). Again, a bipartisan effort.

Market watchers anticipate the bill to pass by the end of Q4 2025. The White House is more ambitious: legislate it all 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 4 months to progress from the House to the Senate discussion phase. Such speed is not common in U.S. legislative history.

What does this bill really change? At its core: shifting primary regulatory authority for the spot digital commodity market to the CFTC, significantly reducing the SEC's purview.

Specifically: the CFTC gains exclusive jurisdiction over the spot digital commodity market, including mainstream assets like Bitcoin, Ethereum, and more. This means the CFTC can regulate digital commodity exchanges, brokers, traders, and custodians, establish anti-manipulation standards, system safeguards, and risk management requirements. In turn, the SEC loses the exclusive oversight of security-type digital assets. The former state of regulatory uncertainty through enforcement will come to a complete end.

The bill's treatment of stablecoins is even more ingenious. It creates a special status for "Licensed Payment Stablecoins": the CFTC's regulatory scope will only cover the regulation of stablecoin transactions, solicitation, and acceptance on registered platforms. The regulator will not have authority over the operations, reserves, or issuance process of stablecoin issuers. This complements the GENIUS Act (focused on issuer licensing and reserves), avoiding regulatory conflicts.

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

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

Powell's Countdown

Fed Chair Powell, who did not heed Trump, is now in the countdown to the end of his term, which expires on May 15, 2026, with six months remaining.

In the coming months, the selection of the next Federal Reserve Chair will be a focus of market attention. 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 is the former Chair of the White House Council of Economic Advisers and has deep ties to President Trump. Due to his position, he analyzed economic data for Trump almost daily and was even called Trump's "economic professor" by the President. Their policy philosophies align, with Hassett being a dove through and through, advocating for rate cuts to stimulate economic growth.

During Trump's first term, Hassett publicly criticized Powell's rate hike policies multiple times, believing that the Fed was tightening monetary policy too aggressively, which 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 changing the internal power dynamics of the Fed, as evidenced by a recent example.

On November 13, as reported by the "Fed Whisperer" Nick Timiraos, Atlanta Fed President Raphael Bostic suddenly announced that he would retire when his current five-year term ends at the end of February next year. This announcement was delicate given the timing of a potential rate cut in December.

After all, Bostic 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 Hassett does become the Fed chair, coupled with the gradual decline of the hawkish voice within the Fed, undoubtedly, the speed and magnitude of rate cuts will exceed market expectations. Liquidity will be significantly released, and risk assets will experience a strong upward surge.

For the cryptocurrency market, this is a very significant positive development.

Another politically critical 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 director of NASA.

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

In December last year, Trump first nominated Isaacman as the NASA director, but withdrew the nomination in May of this year after a fierce argument with Musk over the "Beautiful Law Act," appointing Transportation Secretary Sean Duffy as the acting NASA director, a move aimed at reining in Musk. Subsequently, the two engaged in a heated exchange, staging a "breakup of the century."

Starting in August this year, a turning point emerged. According to The Wall Street Journal, while considering launching the "American Party," Musk's focus has been on maintaining his relationship with Vice President Vance. Sources said that Musk has been in touch with Vance in recent weeks. He admitted to his assistants that if he continues to advance the plan to form a political party, it will damage his relationship with Vance. Reports say that Musk and his aides have informed close associates that if Vance decides to run in the 2028 presidential election, Musk will consider leveraging his vast financial resources to support him, which is indeed the optimal solution for Musk after returning to rational thinking.

In September, the media captured Trump and Musk appearing together at Charlie Kirk's memorial service and shaking hands, indicating a thaw in their relationship. In fact, several U.S. media outlets have reported that with Musk's warming ties to the Republican Party, Isaacman seems to have gradually re-entered the discussion for the nomination of NASA director.

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

The November 4th renomination is another signal of reconciliation, and the timing is quite delicate, coming right after the Democratic Party's local election victory.

The bearish camp sees Trump's declining approval rating, Republican compromises, and a dim 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 impact 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 the arguments from both the bear and bull sides, three viewpoints can be summarized.

First, short-term focuses on liquidity, mid-term focuses on regulation, and long-term focuses on the cycle.

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

However, looking ahead to six to twelve months, a combination of large-scale government spending + the enactment of the "CLARITY Act" + liquidity release may drive the price closer to $170,000. JPMorgan Chase's assessment has its rationale.

As for Raoul Pal's prediction of reaching a peak in the second quarter of 2026, that is more of a long-term cycle judgment. Assuming a five-year cycle instead of a four-year cycle, if this assumption holds true, now may be a good time to position oneself.

The key is to clearly identify the trading timeframe. Short-term traders should focus on liquidity data and government spending progress, mid-term holders should keep an eye on the "CLARITY Act" and the Fed's turnover, while long-term investors should contemplate the business cycle and Bitcoin's fundamental positioning.

Second, political risks have been overestimated but cannot be entirely ignored.

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

A lot can happen politically in a year. Trump's reconciliation with Musk, the possibility of the Republican Party pushing through more favorable laws by the year's end, and improved economic data could also reverse public opinion.

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

A characteristic of U.S. politics is "a big ship is hard to turn around." Once a regulatory framework is set, even with party changes, it is challenging to fully reverse in the short term.

Therefore, the logic chain of betting on "Democratic Party victory leading to crypto doomsday" is oversimplified. Political risks exist, but they are not as fatal as the market imagines.

What is truly worth vigilant about is political uncertainty itself. When the market is in the dark about who will win in the long term, funds tend to stay on the sidelines. This kind of wait-and-see sentiment may harm the market more than any one side winning.

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

The "business cycle" concerns raised by the bears are actually the most significant risks to consider.

If the U.S. economy indeed enters 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 2001 Internet bubble 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 business investment, and food inflation pressuring the middle class.

If these trends persist, 2026 may truly face the risk of a recession. At that time, liquidity releases, regulatory friendliness, Trump-Musk reconciliation, all these could become ineffective. Bitcoin will face a real stress test.

This is also why although JPMorgan has a $170,000 target, they also emphasize the need for a "leverage reset"; why Raoul Pal is bullish for 2026 but also acknowledges that "the market will fluctuate erratically until the stealth QE begins." 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 Fed cut rates in December? How will the results of the 2026 midterm elections be? 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 is still the greatest certainty.