Key Insights
- Bitcoin and altcoin markets saw capital inflows into the crypto market fall from $60 billion to $10 billion over the past month.
- Bitcoin and altcoins were trading in a familiar pattern similar to one seen post-February decline. The descending channel from the October crash hinted at a similar recovery. Will the markets rebound in December?
- The fundamentals indicate that QT ends in a day’s time, there is an 86% chance of a rate cut, financial conditions are loosening, and the DXY is looking weak. Capital inflows could start rising.
The cryptocurrency markets continue to struggle, although there have been signs of potential market recovery from the technical outlook and associated fundamentals.
Bitcoin (BTC) rose above $ 90,000, while the second-largest capped cryptocurrency, Ethereum (ETH), reclaimed the $ 3,000 level. A significant number of tokens indicated that they were preparing for a rally in December, following a bearish trend throughout the last quarter of this year (Q4).
Markets have been changing, and the current outlook explained why this Q4 was different. A detailed dig into the past month’s performance against the backdrop of improving fundamentals hinted Bitcoin and altcoin markets could rally in December.
How Crypto Markets Performed In The Past Month
The entire market was in the red over the past month and, to be specific, since the crypto flash crash of October 10th. This was reflected in the decline in capitalization, which fell from levels above $4 trillion to the current level of $3 trillion.
The aggregate market realized value net position change from Glassnode showed that capital inflows dropped from $60 billion to slightly above $10 billion during this period. For context, BTC and ETH accounted for about $9.20 billion, while stablecoins’ share was about $1.52 billion.
The data meant that BTC, ETH, and stablecoins were the assets being traded during this period of overall decline. Stablecoins introduce liquidity into the markets, and their presence indicates that activity is still ongoing. Interestingly, price action charts and four fundamental factors were in line for a rebound in the crypto markets.
Bitcoin and Total Altcoin Market Cap Hint at Reversal
The total market cap of Bitcoin and altcoins, excluding stablecoins, was coiling in a familiar pattern on the 12-hour chart. The pattern was aligning with history on the daily chart but for the period between February and mid-April of this year. This was the first reason why BTC and altcoins could rally in December.
Following the bull run after the 2024 US elections, the markets peaked in late January and, for some cryptocurrencies, in February. Consequently, the price correction occurred similarly to the current scenario.
Then, the market reversed from a descending trend channel and paused the movement at the midsection of the pattern. When writing, similarities were evident as the total market cap was in this discount zone, forming the pattern from the October 10th crash. Will fundamentals fuel this recovery in December?
Fundamental Reasons Why the Markets Could Rebound in December?
On the fundamental side, there were about four factors that came into play for December. First, the quantitative tightening (QT) was ending upon the start of the last month of the year. This was an indication that the floodgates for capital inflow were opening.
Another signal for potential capital inflow was the high chance of a rate cut. The odds increased to 86%, which was close to the 90th percentile of possibility. In the event of another rate cut, institutions and individuals would have ample resources to invest in risk-on assets like Bitcoin and altcoins.
Additionally, the financial conditions were loosening, which further indicated the anticipated capital inflow into the cryptocurrency markets. Furthermore, the US Dollar index (DXY) was declining which was advantageous for crypto as it is indirectly proportional to prices of these assets. The DXY was below $100 after a few weeks of uptrend, suggesting its dominance was declining, which could pave the way for a broader rebound.
Altogether, the four fundamental factors, in addition to the technical breakout, hinted at a potential market reversal. However, these signals were not a guarantee.
