Cryptocurrency Market Sees Gains Amidst Economic Uncertainty
Bitcoin (BTC) and Ether (ETH) have experienced a surge in momentum, reaching their highest levels in two weeks as investors await more accommodative monetary policy. This increase is largely driven by weak economic indicators, which have heightened expectations of new stimulus measures and increased demand for scarce assets. The S&P 500 index and gold have also reacted positively to the prospect of more liquidity entering the markets.
Despite the cryptocurrency market cap being 29% below its all-time high of $4 trillion, Bitcoin and Ether traders remain cautious about the possibility of a correction due to broader economic uncertainty. The demand for scarce assets has strengthened, as evidenced by the jump in five-year U.S. Treasury prices, with gold nearing $4,240, up 3% in two weeks. Bitcoin has remained steady at around $93,000, while Ether remains 37% below its all-time high of $4,956, causing traders to reassess the outlook for the altcoin market.
Economic Indicators and Monetary Policy
The U.S. labor market has shown signs of slowing in November, with private companies cutting 32,000 jobs and small businesses facing the toughest conditions. The ADP payroll report found that workers’ wages fell 0.1% since October, easing inflation concerns. Traders are now awaiting the Fed’s interest rate decision on December 10, expecting clearer guidance on policy direction. Fed policymakers have signaled divergent views, with some arguing that rate cuts are needed to prevent deeper labor market weakness, while others warn that additional cuts could exacerbate inflation.
The growing reliance of some of the world’s largest companies on investments in artificial intelligence adds further uncertainty. Jean Boivin, head of the BlackRock Investment Institute, has reportedly said, “There is so much talk about the potential of the bubble… people are aware of the risk.” According to Yahoo Finance, BlackRock has also highlighted the physical limitations of a large-scale AI data center expansion.
Cryptocurrency Market Outlook
Demand for bullish leverage positions in Bitcoin and Ether remains unusually low, with the annual funding rate for permanent contracts being below the neutral range of 6% to 12%. This lack of conviction is notable considering that the US Russell 2000 Small Cap Index is just 2.3% below its all-time high. The stock market is expected to directly benefit from expansionary monetary policy through lower capital costs and government incentives related to AI and nuclear energy infrastructure.
Despite weak labor and consumer data, cryptocurrencies are not at immediate risk of collapse. The expected liquidity boost should help ease economic pressures and maintain appetite for scarce assets. As long as monetary conditions continue to ease, it is more likely that Bitcoin and Ether will regain some ground rather than experience a sharp reversal. For more information, visit Cointelegraph.
