Tom Lee interprets the year-end market: How do institutional exits, algorithms, and tax-loss selling dominate the crypto market?

Tom Lee, co-founder of Fundstrat and Chairman of BitMine, recently shared his unique observations on the end-of-year crypto market. He pointed out that during the final holiday trading period of the year, many institutional investors choose to exit the market.

As a result, market dominance shifts toward algorithmic trading and bot trading programs, combined with year-end sell-offs driven by tax avoidance needs. This seasonal pattern is most evident in late December.

Market Dynamics

Tom Lee’s market observations reveal a distinctive behavioral pattern in the cryptocurrency market during specific periods. The chairman of BitMine explicitly stated on social media that the final holiday trading period of the year exhibits clear seasonal characteristics. Many institutional investors opt to exit the market during these times, leaving trading primarily dominated by algorithmic and bot trading programs.

This change in market structure is accompanied by a key factor: year-end sell-offs driven by tax avoidance. According to Tom Lee’s observations, this tax-related selling exerts phased pressure on crypto and related stock prices, peaking between December 26 and December 30. This finding not only explains the price behavior during this specific period but also provides an important framework for investors to understand market rhythms.

Institutional Behavior

Contrasting sharply with the general retreat of institutions, some market participants are actively adjusting their strategies during this special period. BitMine, the company where Tom Lee is involved, is a typical example; they are adjusting their market strategy based on this seasonal pattern. Over the past week, the company has added 44,463 ETH to its holdings. Based on current market value, this increase is worth about $130 million, bringing its total holdings to 4,110,525 ETH. This amount accounts for approximately 3.41% of Ethereum’s circulating supply.

BitMine’s holding strategy demonstrates long-term planning, aiming to hold 5% of the total Ethereum supply to become the world’s largest Ethereum vault. They have already achieved two-thirds of this goal.

Market Data Comparison

The current crypto market presents a thought-provoking contradiction: despite large capital inflows, the prices of major cryptocurrencies have not risen accordingly. In 2025, global crypto ETFs attracted as much as $46.7 billion in funds. Specifically, BlackRock’s IBIT ranks sixth among all US ETFs with inflows of $25.1 billion. The total assets under management of US spot Bitcoin ETFs reached approximately $116.5 billion in late December. However, in stark contrast, Bitcoin and Ethereum declined by 6% and 11% respectively in 2025. This disconnect between capital inflows and price performance reflects the complex dynamics currently at play in the market.

On-Chain Activity

On-chain data further reveals the complex landscape at year-end. From December 22 to 28, the total market cap of stablecoins decreased by $977 million, while activity on decentralized exchanges weakened.

Despite overall liquidity indicators contracting, some institutional investors have not fully withdrawn. Data shows that five institutions increased their Bitcoin holdings by 1,550.84 BTC last week, worth about $135.9 million. Large buyers are also actively accumulating Ethereum, totaling over 136,000 ETH. Besides BitMine’s purchase of 44,463 ETH, Trend Research also acquired 92,415 ETH.

These on-chain activities indicate that even during periods of overall market slowdown, institutional investors and major players are strategically positioning themselves, leveraging seasonal market fluctuations to seek opportunities.

Holdings Analysis

A deeper analysis of BitMine’s holdings provides a clearer picture of how this company operates during the year-end market. As of December 28, 2025, BitMine’s total crypto and cash holdings reached $13.2 billion. Its portfolio includes approximately $12.1 billion worth of 4.11 million ETH, 192 BTC, $23 million invested in what the company calls “moonshots,” and $1 billion in cash. Notably, the company has begun staking some of its ETH holdings. Currently, 408,627 ETH are staked, with an expected annual yield of about 2.81%.

BitMine is advancing its “Made in America Validator Network” (MAVAN) staking solution, scheduled to go live in Q1 2026. If all its ETH is staked, with a compounded staking rate of 2.81%, the company could earn approximately $37.4 million annually from staking.

Trading Perspective

From a trader’s perspective, year-end market dynamics present both challenges and opportunities. The institutional retreat and dominance of algorithmic trading, as pointed out by Tom Lee, may lead to temporary liquidity reduction and increased volatility. For traders using platforms like Gate, this period’s market structure changes warrant special attention. When institutional investors exit, algorithmic and bot trading programs become dominant, potentially altering the market’s price discovery mechanism.

Meanwhile, year-end tax-related sell-offs may create short-term buying opportunities in certain assets. As demonstrated by BitMine’s operations, some market participants are increasing their positions during this period. Market data from Gate shows that major cryptocurrencies often exhibit specific patterns during year-end. While prices may be temporarily pressured by sell-offs, assets with strong fundamentals that are unaffected in the long term could see re-pricing early in the new year.

Future Outlook

Looking ahead to 2026, several factors could influence the direction of the crypto market. Tom Lee has previously noted that the crypto market is transitioning from a retail-dominated pricing framework to one led by institutions and sovereign funds. He believes that the traditional “four-year cycle” may weaken as a result. This perspective is significant for understanding long-term market trends.

In terms of regulation, progress continues but faces some delays. The CLARITY Act is currently stuck in the Senate, with a markup vote postponed to early 2026. Analysts are optimistic about the expansion of crypto ETFs in 2026. Bloomberg Intelligence’s Eric Balchunas projects net inflows between $15 billion and $40 billion, while Galaxy Research expects the launch of over 100 new crypto ETFs.

As algorithmic trading bots execute their final year-end commands, BitMine’s Ethereum holdings have quietly surpassed 4.11 million ETH, accounting for 3.41% of the circulating supply. They are only one-third away from reaching their goal of controlling 5% of Ethereum’s supply. Meanwhile, stablecoin market cap shrank by $977 million in a week, and activity on decentralized exchanges has significantly decreased. The market state described by Tom Lee as “institutional retreat, algorithm-driven” persists.

On one side, ETF capital continues to flow in, creating a prosperity scene; on the other, the prices of major cryptocurrencies remain weak. This contradiction reminds every market participant that behind the apparent capital flows and actual asset values, there are often complex narratives requiring deep interpretation.