In brief
- Bitcoin rose to about $91,950 on Sunday, extending its rebound from the month’s $85,000 trough.
- Traders remain cautious after October’s $19 billion leverage wipeout, with market makers slow to return, Decrypt was told.
- Expectations for a rate cut strengthened as jobless-claim forecasts climb and the Fed concludes QT.
Bitcoin inched higher on Sunday, reclaiming the $90,000 price tag as traders await the Federal Reserve’s last interest-rate decision for the year and this week’s latest jobs data.
The world’s largest crypto is up 1.8% on the day to $91,950 and has since recovered from its early December lows near $85,000, according to CoinGecko data. The asset is up 5.3% for the month.
Bitcoin has been caught in a narrow trading range following the $19 billion leverage wipeout in early October, amid fears of sticky inflation that could complicate the Fed’s path to future rate cuts.
“Shifting rate expectations ripple through crypto funding markets in Asia far more quickly than traditional asset classes,” Michael Wu, CEO of Amber Group, told Decrypt.
“We’re seeing funding spreads and borrow costs move in lockstep with global rate guidance,” Wu added. “This drives a critical re-evaluation of treasury strategies; many desks are diversifying liquidity across CeFi and DeFi venues to isolate against volatility and optimize opportunities as macro cycles accelerate.”
Services inflation, meanwhile, has cooled from last year’s peaks but remains firmer than goods prices, with shelter still running above the Fed’s target.
That uneven progress has complicated the Fed’s disinflation plan and kept traders wary of how far and how quickly rate cuts might unfold, including the central bank’s final decision for the year on Wednesday.
With that setup weighing on investor sentiment, gold and silver have soared, while Bitcoin lingers as the digital asset remains more sensitive to macro shocks than U.S. equities.
“Low liquidity is still an issue for the market,” Ryan McMillin, chief investment officer at Merkle Tree Capital, told Decrypt. “Since the October 10 event, order books were wiped out, and market makers are shy to jump back in in size.”
Economists are forecasting a spike in initial jobless claims on Thursday of 30,000, up from the previous reported figure of 191,000, MarketWatch data shows.
That could bolster the Fed’s case for a cut now that economic data releases have returned to schedule following delays caused by the longest government shutdown in U.S. history.
A cut to the Fed’s funds rate is typically seen as a boon for risk assets, as borrowing becomes cheaper, potentially leading to a rally in risk assets, including crypto, or so the thinking goes.
With economic data now flowing normally again, McMillin said “a cut is not just about certain,” adding that with the Fed ending quantitative tightening on December 1, “the market is set to rally.”
“The rate cut might be the catalyst for that to start,” he said.
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