The Violence Is Over, Part II: The Reset Confirmed

📊 The Violence Is Over, Part II: The Reset Confirmed

📊 Data Verified: 11:10 UK | ETF flows: Farside 28 Nov | Fear & Greed: Alternative.me 11:10 | Derivatives: CoinGlass 11:09 | Price: CoinGlass 11:08 | On-chain: Glassnode/CryptoQuant

At a Glance

The data shows a market that’s not euphoric, not collapsing, but structurally neutral for the first time in months.

Scenario Update:

• Scenario A (Mid-cycle correction, continuation Q1): 65% ← up from 55%
• Scenario B (Extended consolidation into Q2): 30% ← down from 35%
• Scenario C (Cycle top already in): 5% unchanged

Read paths: 2 min (this box) | 5 min (bold sections + blockquotes) | 12 min (full brief)

Part I Recap (30 Seconds)

Thursday we reported that the violence was over. Liquidations collapsed 99% from October’s $19.14 billion peak to $124 million. Funding rates hit dead neutral. The leverage purge was complete.

That was the observation.

Part II is the explanation: why the violence ended, who was positioning during the panic, and what changed structurally that makes this correction different from 2019.

The Headline Everyone Missed

November’s ETF outflow story dominated headlines. $3.5 billion fled Bitcoin ETFs. BlackRock’s IBIT bled $2.2 billion in redemptions. The worst month on record.

Here’s what that headline concealed.

Bitcoin ETFs are approximately 80% retail-owned. When you see “$3.5 billion in ETF outflows,” you’re not watching institutions exit. You’re watching retail panic through institutional infrastructure.

The 13F filings tell the opposite story.

Harvard University’s endowment now holds 6.81 million shares of IBIT, worth $442.8 million. That’s a 257% increase from June. Bitcoin is now Harvard’s largest disclosed U.S. equity holding, larger than Microsoft, larger than Amazon.

Abu Dhabi’s Al Warda Investments added 230% to their position, now $517.6 million.

Emory University increased their Grayscale holdings by 91%.

Bloomberg’s Eric Balchunas framed the Harvard move: endowments of this caliber almost never allocate to ETFs, especially new ones. This represents validation from the most conservative, longest-duration capital in global markets.

The paradox: The same ETF infrastructure showed $3.5 billion in outflows while the smartest money on the planet was buying. Retail used November to flee. Institutions used November to accumulate. Same vehicle. Opposite directions.

The On-Chain Confirmation

The ETF data only tells part of the story. The on-chain data confirms it.

Glassnode shows wallets holding 1,000+ BTC (whales and institutions) reached 1,384 this month, a four-month high. Meanwhile, wallets holding 1 BTC or less dropped to 977,420, a yearly low.

This is the largest divergence between whale accumulation and retail capitulation since November 2022.

CryptoQuant’s data is even more striking. “Permanent holders,” wallets that have never recorded an outflow, absorbed 345,000 BTC during this selloff. Up from 159,000 BTC before the correction began. That’s the largest accumulation surge by diamond hands in several cycles.

These aren’t traders buying a dip. These are allocators who never sell, adding at the fastest rate in years.

The pattern recognition: This exact divergence, whales accumulating while retail flees, preceded the March 2020 bottom ($3,800 → $64,000) and the November 2022 bottom ($15,500 → $73,000). The setup rhymes.

Why This Time Is Different: The Regime Change

So why are institutions so confident? Why accumulate into a 28% drawdown while retail panics?

The answer isn’t chart patterns or hopium. It’s plumbing.

The Federal Reserve just rebuilt the financial system’s architecture, and most crypto analysts missed it entirely.

The Old Regime (2019):

When QT ended in September 2019, Bitcoin fell 35%. The Fed had drained too much liquidity. The repo market seized up. Overnight lending rates spiked from 2.43% to 5.25% in hours. The Fed panicked, injected emergency liquidity, and learned a lesson.

There was no structural backstop. When stress hit, the system broke.

The New Regime (2025):

Three things changed:

1. The Standing Repo Facility exists. Established July 2021, the SRF acts as a permanent emergency lending window. When money markets tighten, banks can borrow from the Fed at a fixed rate, preventing the cascade that broke the system in 2019. On October 31st, 2025, the SRF was tapped for $50 billion, the largest usage since its creation. Rates normalized within days. The mechanism works.

2. The ON RRP buffer is gone. The Fed’s Overnight Reverse Repo facility (where banks and money funds parked excess cash) peaked at $2.5 trillion in late 2022. It’s now effectively zero. This means QT had to end. Any further tightening would hit bank reserves directly, risking another 2019-style crisis. December 1st isn’t a policy choice. It’s a mechanical necessity.

3. The Fed is structurally committed. Shanaka Perera, whose institutional research first identified this “Standing Repo Era” framework, argues that we’ve transitioned from active liquidity destruction to a new normal where the Fed is permanently involved in money markets. Not expanding liquidity yet, but backstopping it. The brake is off. The accelerator isn’t pressed. But the car can’t roll backward the way it did in 2019.

The institutional logic: Patient capital isn’t buying “the dip.” They’re buying the regime change. The 2019 playbook, where QT ending preceded a 35% decline, is obsolete. The architecture changed. Smart money knows this. Retail doesn’t.

The Sentiment Dislocation

Bitwise’s European Head of Research André Dragosch quantified something important this week.

Bitcoin is currently pricing in the most bearish growth outlook since the 2022 Fed tightening cycle and the 2020 COVID crash. His analysis shows Bitcoin’s implied growth expectations have plunged more than one standard deviation below neutral, significantly more pessimistic than actual survey-based macro indicators.

Translation: Bitcoin thinks a recession is coming. The economic data doesn’t agree.

If Bitcoin is wrong about the macro, the snap-back could be violent. Dragosch points to the March 2020 and November 2022 dislocations as precedents. Both times, Bitcoin was pricing in catastrophe that didn’t materialize. Both times, the recovery was outsized.

Fear & Greed at 25 tells the same story. Every major Bitcoin rally in the last decade has begun with sentiment readings between 10 and 25. We’re in the zone.

The December Catalyst Stack

Three events converge in the next two weeks:

December 1, 2025: QT Ends

The Fed stops shrinking its balance sheet. After 29 months and $2 trillion drained, the headwind reverses. This doesn’t guarantee upside, but it removes the active downward pressure that constrained risk assets throughout 2024-2025.

December 10, 2025: FOMC Decision

CME FedWatch shows 82-86% probability of a 25 basis point cut (0.25%) to 3.50-3.75%. Third consecutive cut. Already priced in, so deviation would be the volatility event.

January 15, 2026: MSCI Decision (Watch)

MSCI reviewing whether to exclude companies with significant digital asset holdings. Strategy (formerly MicroStrategy) faces potential removal. JPMorgan estimates $2.8 billion in forced index fund outflows if removed. Near-term volatility risk, but doesn’t change the structural story.

These catalysts don’t guarantee upside. They radically improve the distribution of outcomes.

What Patient Capital Is Watching

Skip the price predictions. These are the observable patterns that matter:

Whale/Retail Divergence: If whale wallets continue climbing while retail wallets decline, the accumulation phase is intact. A reversal in either direction signals regime change.

ETF Flow Composition: Headlines will scream about daily flows. Ignore them. Watch the 13F filings for Q4 (due February 2026) to see what institutions actually did during November’s panic.

Permanent Holder Absorption: CryptoQuant’s permanent holder metric is the cleanest signal of long-term conviction. 345,000 BTC absorbed during this selloff. If that number keeps climbing, the floor is being built.

Liquidity Correlation Lag: Bitcoin moves in the direction of global liquidity 83% of the time in any 12-month period. Research suggests a 10-week lag. QT ending December 1st implies potential price impact by early-to-mid February 2026.

The Bottom Line

Part I observed that the violence was over. Part II explains why it’s unlikely to return the same way.

The Fed rebuilt the plumbing. The SRF backstop exists. The ON RRP buffer is exhausted. QT had to end. Patient capital sees the regime change and is accumulating at the fastest rate in cycles.

Retail sees the price down 28% and is fleeing.

One of these groups is wrong.

The data doesn’t say “buy the dip.” The data says this doesn’t look like a top, the structural backdrop has fundamentally changed, and the smartest money on the planet is positioning accordingly.

November’s headlines told you about the panic. The 13F filings and on-chain data tell you about the positioning.

One story trended. The other will matter.

Sources: CoinGlass | Alternative.me | Farside Investors | Glassnode | CryptoQuant | CoinShares | Bloomberg (Balchunas) | Bitwise (Dragosch) | Federal Reserve

This analysis is educational and should not be interpreted as financial advice. Cryptocurrency investments carry significant risk. Past patterns do not guarantee future results. Always conduct your own research.

Pierce & Pierce Research | November 30, 2025