Bitcoin follows stocks higher as crypto traders remain cautious
Bitcoin made a slight recovery on Monday, edging above $88,000 after experiencing a significant drop to $80,554 on Friday, marking a seven-month low. Despite this marginal improvement, the broader trend in U.S. equities showed a stronger rebound compared to the cryptocurrency market. Bitcoin’s rise of less than 1% to around $88,400 indicates a cautious sentiment among investors, with the market still reeling from losses incurred over the past four weeks.
While Bitcoin saw a modest uptick, other smaller and more volatile tokens, such as XRP and Solana, experienced more notable gains, with XRP rising approximately 7% and Solana climbing about 3%. Despite these positive movements, traders remain reserved in their optimism, reflecting a broader downturn in the crypto market. This decline persists, even in light of increased institutional adoption and policy advancements spearheaded by the supportive stance of President Trump towards the industry.
Global equities received a boost on Monday, led by technology stocks, as investors entered a data-heavy week with increased optimism about potential interest rate cuts by the Federal Reserve in December. However, the crypto market continues to struggle to attract significant capital inflows, with traders finding it challenging to achieve meaningful returns solely through crypto investments, especially in comparison to more traditional equity markets.
Shiliang Tang, the managing director of Monarq Asset Management, highlighted the subdued enthusiasm in the crypto space, noting that liquidity and performance in digital assets have lagged behind equity markets, making it challenging to deploy substantial capital effectively. In response to this market dynamic, traders in the crypto options market have shown a preference for downside protection at lower price levels, with demand for put options at $80,000 eclipsing those at $85,000, indicating a bearish sentiment among investors.
Another concerning development is the negative trend in the bitcoin funding rate, a crucial indicator of market sentiment, over the past few days. This shift, as reported by CryptoQuant, suggests a growing preference for bearish positions in the perpetual futures market compared to bullish bets, signifying a deepening downturn in digital assets as more investors bet against the cryptocurrency.
If this trend persists, November could go down as one of bitcoin’s worst months, reminiscent of the tumultuous period in 2022 marked by corporate collapses that severely impacted the crypto market. The future trajectory of bitcoin, particularly regarding a potential return to $100,000 before Christmas, hinges on various factors, including potential rate cuts and market stability in the coming weeks.
