Bitcoin experienced a boost over the weekend, reaching approximately $91,950 on Sunday, as it continues its recovery from the month's low of $85,000. Despite the price increase, traders are still exercising caution following the massive $19 billion leverage wipeout in October, which has left market makers hesitant to re-engage fully, according to sources from Decrypt.
With the Federal Reserve poised to make its final interest-rate decision of the year and the latest jobs data due this week, expectations are mounting for a potential rate cut. This anticipation is fueled by a rise in jobless-claim forecasts and the conclusion of the Fed's quantitative tightening phase.
On Sunday, Bitcoin managed to climb back above the $90,000 mark, gaining 1.8% on the day to reach $91,950, as reported by CoinGecko. The cryptocurrency has bounced back from its early December dip near $85,000 and has increased by 5.3% for the month. Since October's leverage crisis, Bitcoin has traded within a tight range, with persistent inflation fears threatening to derail the Fed's plans for future rate cuts. While services inflation has cooled from last year's highs, it remains more robust than goods prices, with housing costs exceeding the Fed's target. This uneven inflationary landscape has complicated the Fed's disinflation strategy, leaving investors cautious about the timing and extent of rate reductions, including the central bank's upcoming decision.
In this context, traditional assets like gold and silver have surged, while Bitcoin remains vulnerable to macroeconomic fluctuations, more so than U.S. equities. Ryan McMillin, the Chief Investment Officer at Merkle Tree Capital, noted that "low liquidity is still an issue for the market." He explained that since the October 10 event, order books have been depleted, and market makers are hesitant to make significant commitments.
Economists are predicting an increase in initial jobless claims to 30,000 on Thursday, up from the previously reported 191,000, as per MarketWatch data. This increase could support the Fed's rationale for a rate cut, especially with economic data releases resuming their regular schedule following the longest government shutdown in U.S. history. A reduction in the Fed’s funds rate is often seen as favorable for risk assets, paving the way for a potential rally in cryptocurrencies, among other assets.
With the release of economic data back on track, McMillin suggested that "a cut is not just about certain," emphasizing that the end of the Fed's quantitative tightening on December 1 sets the stage for market growth. He added that "the rate cut might be the catalyst for that to start."