Key takeaways:
The low leverage appetite for BTC and ETH contrasts with robust stock markets, indicating fragile sentiment even as liquidity expectations improve.
While economic uncertainty remains, anticipated monetary easing lessens downside risk for cryptocurrencies, encouraging a potential bullish trend.
On Wednesday, Bitcoin (BTC) and Ether (ETH) experienced upward momentum, reaching their highest values in two weeks as investors look forward to looser monetary policies. Weak economic indicators heightened expectations for new stimulus initiatives, spurring interest in scarce assets.
The S&P 500 index and gold also benefited as investors predicted increased liquidity in the markets. Nevertheless, with the cryptocurrency market cap at 29% below its peak of $4 trillion, Bitcoin and Ether traders remain vigilant regarding potential corrections fueled by broader economic uncertainties.
Demand for limited assets on Wednesday was illustrated by an increase in US 5-year Treasury prices and gold nearing $4,240, up 3% over two weeks. Bitcoin remained around $93,000, unchanged over the same period, while Ether sits 37% below its all-time high of $4,956, prompting traders to reevaluate the altcoin market outlook.
Signs of a slowing US labor market emerged in November, with private companies shedding 32,000 jobs, particularly impacting small businesses. The ADP payroll report indicated a 0.1% decline in pay from October, alleviating inflation worries. Traders now look to the Fed’s interest rate decision on Dec. 10 for clearer policy direction.
Crypto poised to gain from incoming liquidity
Fed policymakers have expressed diverging opinions, partly due to the absence of official US government data amid the funding shutdown that concluded on Nov. 12. Some suggest rate cuts are essential to avert deeper labor market issues, while others caution that further reductions could worsen inflation, which exceeds the Fed’s 2% target.
The increasing reliance on AI investments by major corporations adds another layer of uncertainty. Jean Boivin, from the BlackRock Investment Institute, reportedly remarked: “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 limits of large-scale AI data center expansion.
Macy’s, the US department store chain, stated on Wednesday that its outlook reflects ongoing challenges from cautious consumer spending and heightened tariffs, which are expected to impact final quarter results for 2025. CEO Tony Spring noted Macy’s has had to implement “selective” price increases across most categories.
Demand for bullish leveraged positions on Bitcoin and Ether is currently low. Under normal circumstances, the annualized funding rate on perpetual contracts should range between 6% and 12% to account for capital costs. This lack of confidence is striking given that the US Russell 2000 Small Cap Index is only 2.3% shy of its all-time high.
Related: Ethereum treasury trade unwinds 80% as a few whales dominate purchases
The stock market is anticipated to directly benefit from expansionist monetary policies via lowered capital costs and government incentives related to AI and nuclear energy infrastructure. Without a change in sentiment, cryptocurrencies may continue to lag as job market conditions weaken and uncertainties grow.
Despite the lackluster labor and consumer data, cryptocurrencies are not on the brink of collapse. The projected influx of liquidity should help alleviate economic strain and maintain interest in limited assets. If monetary conditions continue to ease, Bitcoin and Ether are more likely to recover gradually rather than face a drastic downturn.
This article is for general information purposes and is not intended to be and should not be taken as legal or investment advice. The views, thoughts, and opinions expressed here are the author’s alone and do not necessarily reflect or represent the views and opinions of Cointelegraph.
This article does not contain investment advice or recommendations. Every investment and trading move involves risk, and readers should conduct their own research when making a decision. While we strive to provide accurate and timely information, Cointelegraph does not guarantee the accuracy, completeness, or reliability of any information in this article. This article may contain forward-looking statements that are subject to risks and uncertainties. Cointelegraph will not be liable for any loss or damage arising from your reliance on this information.
