The cryptocurrency market found new life on Tuesday as Bitcoin rallied to $88,100, recovering from a dip toward $82,000 the previous week. This upward momentum comes on the heels of increased expectations of a Federal Reserve rate cut in December, with traders assigning over 80% probability to a quarter-point reduction at the upcoming meeting.
This shift in market outlook has not only bolstered BTC prices but has also positively impacted the stock markets. On Monday, the S&P 500 recorded a gain of 1.6%, while the Nasdaq surged by 2.7%, marking the most significant rebound for technology stocks since May. The bullish sentiment surrounding various assets signals a coordinated recovery as traders recalibrate their strategies in light of the Fed’s monetary policy.
Traders reacted strongly to comments from Federal Reserve officials, with New York Fed President John Williams hinting at potential cuts in the “near term” and Fed Governor Chris Waller reiterating this sentiment. This communication prompted a scramble among market participants, pushing Polymarket betting odds sharply in favor of a December rate cut.
As markets stabilized, Ethereum also joined the recovery, trading around $2,945 after experiencing a pullback last week. The improved risk appetite has benefited both crypto and traditional assets, including gold, which was priced near $4,140 during early trading hours in Asia.
QCP Capital reported a notable change in funding rates across the perpetual futures space, turning negative as long leverage was cleared out. This development is seen as a positive sign that alleviates fears of a forced liquidation event, allowing traders to enter the market with a more balanced risk profile.
Despite Monday’s gains, major indexes remain susceptible to monthly losses as investors continue to reassess valuations in AI and growth stocks after a significant run-up. Stock futures were marginally in the red on Tuesday morning, consolidating previous gains in anticipation of economic indicators releasing later in the week.
The outlook for year-end trading appears mixed, as open interest in call options continues to outweigh puts at significant price strikes, including $85,000, $120,000, and $140,000. Traders are hedging their positions in both directions, indicating a cautious but hopeful sentiment moving into the holiday trading season.
Data from Glassnode highlights signs of a structural reset within the crypto market characterized by oversold momentum and an increase in short-term holder supply. The report suggests that the recent decline appears to be a controlled correction rather than a chaotic liquidation, with selling pressure driven primarily by aggressive futures sellers rather than spot market disruptions.
This week, attention turns toward the release of pivotal economic data, including updates on producer prices and retail sales, alongside a reading on consumer confidence. With a U.S. holiday on Thursday for Thanksgiving and a truncated trading schedule on Friday, market participants will be keenly watching how this week unfolds against a backdrop of evolving monetary policy dynamics.
