December’s $910B crypto flush separates pros from panic‑selling tourists: Finestel

December’s $910B “capitulation” crushed high‑beta gamblers, while pro desks rotated to cash, BTC, ETH and select privacy/AI plays, according to Finestel.

A new report by the crypto fin-tech company Finestel suggests that December’s $910 billion crypto flush didn’t just punish gamblers; it cleanly separated professional risk managers from everyone else. While retail traders panic‑sold into a cascading drawdown, institutional desks quietly rotated to defense, preserving capital and keeping dry powder for 2026.​

December’s capitulation, in numbers

• Total crypto market cap fell 23% in weeks, from roughly 3.913.91 trillion to 3.003.00 trillion, erasing about 910910 billion in paper value in what analysts now call the “December Capitulation.”​
• Bitcoin (BTC) opened the month near 94,00094,000, briefly reclaimed that level in a classic “bull trap,” then closed around 88,00088,000, down 6.4% for December but still up about 114% year‑to‑date.​
• Ethereum (ETH) slid 7.8% to roughly 2,9702,970, while overall trading volumes collapsed 18% to 862862 billion, creating a thin‑liquidity backdrop where Bitcoin’s 30‑day realized volatility spiked to 32%.​

“The broader market metrics were brutal,” one section of the Finestel report notes, describing a selloff that “actually surpassed” earlier year‑end downturns in scale.​

Macro shock: Fed, BoJ and geopolitics

The trigger was a dense cluster of macro shocks rather than a single on‑chain failure. Markets had crowded into the so‑called “Hassett Trade,” betting that President Trump’s nominee Kevin Hassett would deliver aggressive easing and even 50‑basis‑point cuts.​

Instead, the December 9–10 FOMC meeting produced just a 25bp cut and a hawkish dot plot that penciled in only one cut for 2026, with Jerome Powell stressing a “meeting‑by‑meeting” stance that “killed the pivot narrative.” Days later, the Bank of Japan jolted the global carry trade by lifting rates to 0.25% despite an 18.3 trillion yen stimulus package, tightening the screws on leveraged bets funded in cheap yen.​

That policy squeeze landed in the middle of an ugly geopolitical tape: US strikes in Venezuela, threats toward the Fed chair, and drone incidents involving Russia created what the report calls a “perfect storm of policy disappointment and geopolitical fear.”​

How “smart money” played defense

Where the story turns is in the reaction. Data from Finestel‑monitored portfolios shows professional managers didn’t simply ride the market lower; they executed a deliberate pivot to safety.​

• Cash ramp: Stablecoin allocations climbed from about 20% in November to a peak of 23.1% by late December, not as an exit but as “dry powder moving to the sidelines.”​
• De‑risking: Exposure to high‑beta altcoins was cut to under 11%, with capital concentrated in a handful of high‑conviction themes.​
• Deleveraging: Average leverage dropped to roughly 1.3x, a multi‑year low, as desks actively unwound crowded long positions.​

Finestel’s backtests suggest this defensive mix “mitigated approximately 85% of the potential drawdowns” during the crash, underscoring what the report describes as the “growing maturity of professional crypto management.”​

On‑chain, Glassnode data shows classic capitulation dynamics. Long‑term holders had already sold into early‑month strength near 94,00094,000, while short‑term holders offloaded more than 300,000 BTC into the 86,000–94,00086,000–94,000 band. Derivatives told the same story: implied volatility jumped about 30%, put skew dominated January expiries, open interest fell 25%, and liquidations surpassed 5.25.2 billion, “predominantly wiping out over‑eager long positions.”​

Winners, losers and token stories

Even inside a 23% drawdown, there was alpha for those positioned in real narratives. Privacy and AI names led what the report calls a “flight to quality catalysts,” while meme coins reprised their role as exit‑liquidity traps.​

• Privacy token NIGHT jumped 45%, helped by a favorable SEC roundtable and ecosystem collaborations around identity infrastructure.​
• AI‑linked TAO gained 25% off a mid‑December halving and the launch of a Grayscale‑style trust, cementing its status as one of the “strongest charts in the room.”​
• Regional play ZBT surged 67% on heavy South Korean inflows, echoing earlier cycles in which Korean exchanges acted as local leverage hubs.​
• Meme coin Whitewhale, by contrast, staged a 200% pump followed by “immediate, sharp corrections,” a reminder that in a risk‑off tape, pure speculation is usually first to be repriced.​

Outside token‑level action, flows also diverged at the corporate level. While investment funds saw roughly 650650 million in net outflows from crypto products, corporate treasuries quietly increased their holdings; MicroStrategy alone added 1,229 BTC, helping lift corporate balances about 5% for the month.​

Looking into Q1 2026

January opens with volatility still elevated and a clear line in the sand on the Bitcoin chart. Technicians watching institutional flows mark 83,50083,500 as the key level: hold it, and a grind back toward 92,00092,000 stays on the table; lose it, and a flush toward 80,00080,000 becomes more likely.​

The Finestel allocation model for January leans into that uncertainty with a defensive blueprint: roughly 52% in BTC and ETH as a core, about 23% in stablecoins ready for tactical dips, and limited altcoin exposure focused on yield‑bearing protocols and event‑driven names such as privacy and AI plays.​

“Volatility is the price of admission in crypto,” the report concludes, arguing that for investors who managed risk, hedged drawdowns and “ignored the noise,” the structural bull case “remains very much alive” despite December’s flush.