There are signs of cautious stabilization on the crypto markets this week #bitcoin seems to have found a bottom after the cryptocurrency hit an intraday low of USD 80,553 on November 21. The subsequent recovery coincided with comments from FOMC member John Williams, who stated that there was "scope for a rate cut in the near term to move monetary policy towards a more neutral stance". In the absence of other relevant stimuli, his words appear to have been the main trigger for the improvement in sentiment.
Nevertheless, the on-chain data shows that the environment remains fragile. The largest whale group, which holds more than 100,000 Bitcoin, dumped around USD 12.3 billion last month, putting pressure on prices. Smaller whales in the 10,000 to 100,000 Bitcoin range have offset some of this selling, adding around USD 4.6 billion over the same period. The determined selling by the biggest players also unsettled investors in exchange-traded products, which have seen outflows of USD 5 billion over the past four weeks. However, there was a marked turnaround this week: Inflows of USD 900 million indicate that the prospect of monetary easing is being received positively.
Altcoins are conspicuously resilient
Bitcoin's dominance of the crypto markets has fallen by around 1.5 percentage points this month - an indication that the broader market has not yet capitulated. Many major altcoins have maintained their structure despite the setback. Part of the recovery can be attributed to the fact that Bitcoin was heavily oversold and momentum indicators reached levels that historically often coincided with short-term countermovements. The expectation of an interest rate cut in December is having a supportive effect, while the massive selling pressure from wallets with 50,000 to 100,000 Bitcoin appears to be easing. The popular four-year cycle narrative resurfaced during the downturn, but its statistical resilience remains low - both due to the small sample size and in light of an improved macroeconomic environment.
What is striking in this market environment is the resilience of many #altcoins relative to Bitcoin. Historically, a sell-off of this magnitude would have led to broad-based capitulation, but numerous assets held key support zones and showed relative strength in some cases. However, liquidity has thinned since October 10, increasing downside volatility and making it unlikely that markets will advance to new highs in the short term.
Between recovery and caution
Financing rates remain nervous and positioning is not yet fully adjusted, but the overall market structure is gradually improving. If expectations of interest rate cuts continue to consolidate and selling pressure from major counterparties eases, the recent period of weakness could prove to be a temporary blip rather than the start of a more pronounced downturn. At present, the markets appear to be consolidating rather than fragile. Bitcoin has absorbed extensive forced supply, altcoins are stable and last week's momentum is already losing steam. This phase of the cycle calls for ongoing reassessment rather than rigid adherence to a particular narrative. (Author: James Butterfill, CoinShares' Head of Research)
