Key takeaways:
Low BTC and ETH leverage interest contrasts with strong stock market performance, indicating fragile sentiment despite improving liquidity expectations.
Although economic uncertainty remains, projected monetary easing mitigates downside risks for cryptocurrencies, potentially fostering bullish momentum.
Bitcoin (BTC) and Ether (ETH) surged on Wednesday, reaching their highest levels in a fortnight as investors anticipate a more expansionist monetary policy. Weak economic signals heightened hopes for new stimulus measures, driving demand for scarce assets.
The S&P 500 index and gold also responded positively as investors looked forward to an influx of liquidity in the markets. However, with the cryptocurrency market capitalization still 29% below its peak of $4 trillion, traders are vigilant for potential corrections influenced by broader economic uncertainties.
Demand for scarce assets intensified on Wednesday, as reflected by rising US five-year Treasury prices and gold approaching $4,240, marking a 3% increase over two weeks. Bitcoin remained around $93,000, steady from two weeks prior. In contrast, Ether is still 37% below its all-time high of $4,956, prompting traders to reevaluate the altcoin market outlook.
The US labor market is showing signs of deceleration in November, with private firms cutting 32,000 jobs, particularly affecting small businesses. The ADP payroll report indicated a 0.1% decline in wages from October, alleviating some inflation concerns. Traders are now waiting for the Fed’s interest rate decision on Dec. 10, anticipating clearer policy direction.
Crypto should benefit from additional incoming liquidity
Fed officials have expressed differing opinions, partly due to the absence of official US government data during the funding shutdown that ended on Nov. 12. Some advocate for rate cuts to avert deeper labor market deterioration, while others caution that further reductions may worsen inflation, which exceeds the Fed’s 2% target.
The growing reliance on artificial intelligence investments by major companies adds another layer of uncertainty. Jean Boivin, head of the BlackRock Investment Institute, reportedly stated: “There is so much discussion about the potential of a bubble… people are aware of the risk.” According to Yahoo Finance, BlackRock has also emphasized the physical constraints of large-scale AI data center development.
Macy’s, a US department store operator, announced Wednesday that its outlook reflects continued strain from cautious consumer spending and increased tariffs, which are anticipated to impact results in the latter months of 2025. CEO Tony Spring stated in a CNBC interview that Macy’s has had to implement “selective” price hikes across most categories.
Interest in bullish leverage positions for Bitcoin and Ether remains notably low. Under neutral conditions, the annualized funding rate on perpetual contracts typically falls between 6% and 12% to account for the cost of capital. This reluctance is significant, given that the US Russell 2000 Small Cap Index is just 2.3% shy of its all-time high.
Related: Ethereum treasury trade unwinds 80% as a few whales dominate purchases
The stock market is poised to directly benefit from expansionary monetary policies through reduced capital costs and government incentives related to AI and nuclear energy infrastructure. Without a change in sentiment, cryptocurrencies may struggle to keep pace as job market conditions weaken and uncertainty escalates.
Despite the weak labor and consumer data, cryptocurrencies do not face imminent collapse. The anticipated liquidity boost is expected to alleviate economic pressures and maintain demand for scarce assets. As long as monetary conditions remain accommodating, Bitcoin and Ether are more likely to gradually recover than to experience a sharp downturn.
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