Written by: Glendon, Techub News
In the early hours of today, the cryptocurrency market experienced a slight overall increase, with Bitcoin breaking through $89,000, approaching the critical psychological level of $90,000; Ethereum also rose to $2,987. According to SoSoValue data, as of the time of writing, almost all sectors showed an upward trend, with the PayFi and NFT sectors leading the gains at 6.63% and 3.51%, respectively.
Looking back to "Black Friday" on November 21, the cryptocurrency market faced a "cold wave." Bitcoin's price once plummeted to $80,600, a drop of over 36% from the previous high of $126,000, nearly breaching the $80,000 mark. The total market capitalization of cryptocurrencies globally fell below $3 trillion for the first time since May of this year. The recent market rally has also prompted market speculation: is the current trend merely a brief "dead cat bounce," or a positive signal of a potential trend reversal? Compared to last week, what new macro and internal factors are affecting the cryptocurrency market?
On the macro level, in stark contrast to last week, the prospect of a Federal Reserve rate cut in December has heated up. According to The Wall Street Journal, Mary Daly, President of the San Francisco Federal Reserve, stated on Monday that she supports the Fed taking measures to cut rates at next month's meeting. She believes that the likelihood of a sudden deterioration in the job market is greater than a resurgence in inflation, which is also more difficult to manage. The Fed should not delay rate cuts out of concern for needing to reverse policy direction in the future.
Since Daly rarely disagrees with Fed Chair Jerome Powell in public, her viewpoint immediately attracted widespread market attention. Following this, the probability of a 25 basis point rate cut by the Fed in December quickly rose to 80.9%. Meanwhile, the market betting on the Fed's rate cut in December on Polymarket also increased by 14%, reaching 82%. Currently, the total trading volume in this prediction market has reached approximately $160 million.
Directly related to this is the fluctuation in market sentiment. Data from Alternative.me shows that the cryptocurrency fear and greed index rose to 20 today. Although it remains in a state of "extreme fear," it has significantly eased from last week's near two-year low of "10." Historical experience indicates that extreme fear often accompanies price bottoms, and the current improvement in the macro environment could serve as a catalyst for the market to emerge from its lows.
As a result, voices advocating for "bottom fishing" have emerged. Xie Jiayin, head of Chinese operations at Bitget, believes that the market experienced similar corrections and panic in March and April of this year, but it later proved to be a buying opportunity. The current market situation is quite similar to that historical context.
However, compared to the market's optimistic expectations for rate cuts, institutional interest in Bitcoin and related ETFs continues to cool. Last week, the net purchase amount of Bitcoin by globally listed companies (excluding mining companies) was only $13.4 million, a significant drop from the previous week's $836 million. The main reason for this huge discrepancy is that Strategy did not increase its Bitcoin holdings last week. Additionally, TD Cowen's latest report conveyed some unfavorable signals. The report pointed out that Strategy's Bitcoin premium continues to decline, currently "approaching the lows of the 2021-2022 crypto winter." Although TD Cowen remains bullish on MSTR, it also emphasized that the risk of Strategy being removed from the MSCI index has significantly pressured its stock price. It expects the company to be removed from the index and to continue facing pressure under MSCI's shadow.
Ethereum's data is similarly unoptimistic. Strategic ETH Reserve data shows that the Ethereum DAT company holds approximately 6.36 million Ethereum, with a total increase of only 50,000 in the past seven days. However, last week, BitMine alone increased its holdings by 69,822 Ethereum, suggesting that other DAT companies sold at least nearly 20,000 Ethereum.
Moreover, in the broader context of market capital flows, the performance of Bitcoin and Ethereum ETFs has been dismal. Last week, Bitcoin spot ETFs saw a net outflow of $1.22 billion, marking four consecutive weeks of net outflows; Ethereum spot ETFs experienced a net outflow of $500 million last week, also continuing a three-week streak of net outflows. CoinShares' latest weekly report further indicated that despite initial signs of a shift in market sentiment, the total outflow of funds from digital asset investment products last week still reached $1.94 billion, achieving a total outflow of $5.47 billion over four weeks. Among these, Bitcoin and Ethereum investment products saw net outflows of $1.27 billion and $589 million, respectively.
Notably, Bloomberg ETF analyst Eric Balchunas tweeted that BlackRock's Bitcoin spot ETF "IBIT" has significantly reduced its short positions, now approaching the lows seen before the market rally in April of this year. This phenomenon indicates that short sellers are closing their positions on a large scale. As a key indicator for observing Bitcoin ETFs, this may signal that the market is about to experience some positive changes.
Unlike Bitcoin and Ethereum, the altcoin ETF market appears to be a rare "clean slate," with institutions seemingly focusing most of their energy on a broader layout of crypto ETF products. Despite the negative impacts of the ongoing decline in the crypto market and shrinking liquidity, altcoin spot ETFs continue to show resilient vitality. Among them, the SOL spot ETF achieved a net inflow of $128 million last week and has maintained a net inflow for four consecutive weeks; the XRP spot ETF saw a net inflow of nearly $180 million last week, performing remarkably well.
Furthermore, following the listing of the Canary XRPC ETF and Bitwise XRP ETF, the Grayscale XRP ETF (ticker GXRP) and Franklin XRP ETF (ticker XRPZ) officially listed on the New York Stock Exchange (NYSE) yesterday, bringing the total number of XRP spot ETFs to four. Notably, both GXRP and XRPZ saw net inflows exceeding $60 million on their first day of trading. As of the time of writing, the total net assets of the SOL spot ETF and XRP spot ETF have reached $844 million and $629 million, respectively, with cumulative net inflows of $568 million and $587 million.
Additionally, the first DOGE spot ETF in the U.S., "GDOG," was listed yesterday, and Bitwise's DOGE ETF (ticker BWOW) is set to launch this Wednesday, further enriching the variety and quantity of crypto ETFs in the market. In this regard, Eric Balchunas predicts that over the next six months, more than 100 cryptocurrency ETFs will emerge in the market, with major Wall Street institutions making a significant push into the ETF space, sparking an intense "land grab."
From the perspective of short-term market dynamics, the cryptocurrency market does not yet appear to be widely deemed to have entered a "bear market cycle." The co-founder and CEO of BitMEX pointed out in a post last night that liquidity from the Federal Reserve has slightly improved, and the Fed's quantitative tightening (QT) is expected to end on December 1, with this Wednesday possibly being the last reduction of the balance sheet. He believes Bitcoin will continue to oscillate in the $80,000 to $90,000 range in the short term, but expects $80,000 to form solid support.
This analysis aligns with the general market view, as the market exhibits many characteristics of an early "bear market." The $80,000 level remains a critical psychological and technical support level for Bitcoin. CryptoQuant analyst Crypto Dan noted that short-term holders of Bitcoin are currently experiencing panic selling, a situation reminiscent of previous bull market correction phases, but on a smaller scale.
The market may follow two distinctly different paths: if the current situation is merely a "deep adjustment," then the market may be nearing its bottom, with a rebound imminent; if Bitcoin continues to decline and breaches the $80,000 mark, it would mean the market is fully entering a "bear market cycle," facing greater challenges. Crypto Dan believes the likelihood of this bear market experiencing a decline of over 70%, as seen in history, is low.
Additionally, some long-term holders are building positions within this price range. Glassnode pointed out that Bitcoin's price tested the $80,000 mark before a slight rebound. Currently, market momentum remains in an oversold state but has shown signs of fatigue. Derivatives and spot trading volumes remain sluggish, indicating that the market is orderly reducing risk, with investors becoming more cautious. This suggests that the downward momentum in the market may gradually weaken, but a strong rebound has yet to form.
Ultimately, whether the cryptocurrency market can reverse its downward trend still depends on the dynamic interplay of multiple factors. The significant increase in the probability of a Federal Reserve rate cut in December injects expectations for improved liquidity into the market, directly alleviating the panic that previously arose from tightening monetary policy; at the same time, the $80,000 mark for Bitcoin has become a key barometer. If the price can stabilize within this range, combined with the existing positive signals in the market, it may lay the groundwork for a trend reversal; otherwise, the market may enter a prolonged bear market cycle.
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