Key takeaways:
Low leverage interest in BTC and ETH contrasts with robust stock market performance, underscoring fragile sentiment despite positive liquidity outlooks.
Ongoing economic uncertainty is mitigated by expected monetary easing, potentially encouraging a bullish trend for cryptocurrencies.
On Wednesday, Bitcoin (BTC) and Ether (ETH) gained traction, reaching their highest points in two weeks as investors look forward to a more accommodating monetary policy. Dismal economic data heightened expectations for new stimulus measures, driving interest in scarce assets.
The S&P 500 index and gold also experienced positive movements as investors anticipated an influx of liquidity in the markets. However, with cryptocurrency market capitalization currently at 29% below its $4 trillion peak, Bitcoin and Ether traders remain vigilant about possible corrections due to broader economic uncertainties.
The demand for scarce assets rose on Wednesday, evidenced by the surge in US 5-year Treasury prices and gold nearing $4,240, a 3% increase over two weeks. Bitcoin remained around $93,000, stable from two weeks prior. Ether, however, is still 37% shy of its all-time high of $4,956, leading traders to reevaluate the altcoin market’s prospects.
The US labor market indicated signs of slowdown in November, with private firms cutting 32,000 jobs, particularly affecting small businesses. The ADP payroll report noted a 0.1% wage decline from October, which alleviated some inflation worries. Traders now await the Fed’s interest rate decision on Dec. 10 for clearer guidance on policy direction.
Crypto should benefit from the additional incoming liquidity
Fed policymakers exhibit divergent perspectives, partly due to the absence of official US government data during the government funding freeze that concluded on Nov. 12. Some contend that rate cuts are essential to prevent further deterioration of the labor market, while others caution that additional cuts could exacerbate inflation, which remains significantly above the Fed’s 2% target.
An increasing reliance on artificial intelligence investments from leading global companies introduces another layer of uncertainty. Jean Boivin, head of the BlackRock Investment Institute, reportedly stated: “So much discussion surrounds the potential for a bubble… people are aware of the risks.” According to Yahoo Finance, BlackRock also pointed out the physical constraints faced by large-scale AI data center expansion.
The US department store chain Macy’s announced on Wednesday that its outlook reflects persistent challenges posed by cautious consumer spending and increased tariffs, which are expected to impact its results in the latter months of 2025. In a conversation with CNBC, CEO Tony Spring indicated that Macy’s has been compelled to implement “selective” price hikes across various categories.
Interest in bullish leverage positions for Bitcoin and Ether remains notably low. Under normal circumstances, the annualized funding rate on perpetual contracts should land between 6% and 12% to account for capital costs. This lack of confidence is particularly striking given that the US Russell 2000 Small Cap Index is just 2.3% beneath its all-time high.
Related: Ethereum treasury trade unwinds 80% as handful of whales dominate buys
The stock market is likely to gain directly from expansionist monetary strategies through reduced capital costs and government incentives associated with AI and nuclear energy infrastructure. Without a shift in sentiment, cryptocurrencies may continue to lag as job market conditions weaken and uncertainty amplifies.
Despite the weak labor and consumer metrics, cryptocurrencies are not at immediate risk of collapse. The anticipated liquidity increase should alleviate economic stress and maintain interest in scarce assets. As long as monetary conditions continue to relax, Bitcoin and Ether are more apt to regain modest ground rather than face a significant downturn.
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