(Kitco News) – Financial markets were mixed in early trading on Monday as investors continued to digest the prospect of higher for longer interest rates after the Fed signaled that it was in no hurry to reduce rates last week due to sticky inflation and a strong economy.
“The upside volatility in the price of Bitcoin has slowed down since it crossed the $90,000 ATH range,” said Maksym Sakharov, co-founder and board member of WeFi. “The fact that the US Federal Reserve is no longer in a rush to cut interest rates moving forward has further forced investors to re-evaluate their bets on Bitcoin.”
“The market is rationalizing what this means, especially for an asset sensitive to macroeconomic trends,” he added. “Should the Fed adopt a mildly hawkish stance toward the rate, the attractiveness of Bitcoin may decrease. The lower rate pushes traditional financial investors to go all-out, seeking risk assets to bet on moving forward.”
Data provided by TradingView show that Bitcoin (BTC) largely traded above support at $90,000 over the weekend as it continued to consolidate following its rally to a new all-time high of $93,540 last Wednesday.
BTC/USD Chart by TradingView
Bitcoin’s consolidation has resulted in some traders rotating into altcoins, with many posting double-digit rallies as traders prepare for altcoin season. Several tokens that rallied alongside Bitcoin have also seen profit-taking, but overall, the total crypto market cap continues to climb and now stands at $3.1 trillion, the highest level on record.
“As Bitcoin dominance shifts, so do almost all altcoins, maintaining a strong correlation with Bitcoin,” Sakharov said. “As BTC price dropped from a high of $90,677.18 to a low of $86,979, altcoins like Ethereum and XRP also tumbled to $2,897 and $0.4425, respectively. Notably, these top altcoins have recorded intriguing growth rallies this week, but the performance of BTC has only outstripped that of XRP. The coin reclaimed the $0.8 mark, its highest mark thus far this year.”
“Since most altcoins move mostly when Bitcoin skyrockets, the broader market is looking at the impact of the global economic policies on the top coin,” he added. “With US PPI inflation data up 2.4% against the expected 2.3%, the claims that the rate cut moves are not as effective have filled the horizon. This has given the Fed some clarity on how to proceed with caution.”
“Against the proponents of another rate cut in December, The Kobeissi Letter has pegged the odds of a December rate cut at 59%,” he noted. “This might change depending on core market data, which Jerome Powell said the Fed Reserve will monitor to make further decisions.”
Despite the renewed concerns about the Fed pausing interest rate cuts, the crypto market remains resilient thanks to heavy inflows into exchange-traded funds (ETFs).
“The Bitcoin and Ethereum ETF market has also hinted at the growing demand for the two digital currencies. Based on the inflow recorded in the past week, the total BTC netflow now comes in at $27.8 billion, and Ethereum’s at $238 million, according to Farside Investors data,” Sakharov highlighted. “With this reliable demand source, both digital currencies have a basis to resist heavy retail selloff and possibly set BTC on a path for multiple ATHs moving forward."
Ryan Lee, Chief Analyst at Bitget Research, largely aligned with Sakharov’s outlook, noting that “The wealth effect in the market is strong, with high bullish sentiment.”
“There are several key indicators to watch this week,” Lee highlighted in a note shared with Kitco Crypto. “First, external market disruptions could impact the crypto market. After Trump was elected president, the US dollar index and the 10-year Treasury yield both continued to rise, putting pressure on risk markets.”
“The market expects that Trump's administration will increase tariffs and cut taxes domestically, which could lead to economic instability and potentially raise inflation levels,” he added. “Last Thursday and Friday, US stock markets experienced sharp declines, but this risk has not yet affected the crypto market. It is essential to closely monitor the potential impact of the US stock market on crypto assets.”
“Second, the BTC ETF fund flows are an important factor to consider,” Lee said. “After Trump’s presidential candidacy announcement, traditional finance significantly increased BTC purchases through BTC ETFs. However, over the past weekend's two trading days, there was a net outflow of funds, which put pressure on BTC prices. Monitoring the inflows and outflows of BTC ETFs is crucial to understanding the short-term market direction.”
“Lastly, the appointment of the US Treasury Secretary is another significant factor,” he underscored. “The Treasury Secretary is responsible for implementing fiscal policies in the US. The market currently expects Trump to choose between Howard Lutnick and Scott Bessent.”
“Howard Lutnick is the CEO of Cantor Fitzgerald, which is the US Treasury bond custodian for Tether, while Scott Bessent, the founder of Key Square Group, has recently voiced support for BTC and aligns with Trump’s policies,” Lee explained. “Both candidates are seen as crypto-friendly, meaning that the appointment could trigger short-term speculation driven by the announcement.”
As the post-election ‘Trump Trade’ continues to wane, Lee expects volatility to decline but cautions investors not to get overly zealous with using leverage, thinking that prices will go up only from here.
“It is expected that BTC and ETH will experience reduced volatility this week, with BTC forecasted to trade between $85,000 and $95,000, and ETH between $2,800 and $3,500,” he concluded. “Users should be cautious when using leverage, set stop-loss points, and remain alert to the risk of sudden market pullbacks.”
At the time of writing, Bitcoin trades at $92,129, an increase of 2.22% on the 24-hour chart.
