Following last week’s significant market downturn, which saw Bitcoin (BTC) narrowly avoid falling below the $80,000 mark, the cryptocurrency market experienced a general recovery over the weekend. BTC temporarily stabilized around $86,000, while Ethereum (ETH) reclaimed the $2,800 level. However, historical trends from recent months suggest that weekend rallies often precede a decline early in the week, typically on Monday or Tuesday. After the previous week’s volatility, many market participants believe cryptocurrencies have entered a bear market. Under this ‘bear market logic,’ any rebound is seen as an opportune moment for investors to exit positions. Observations of increased inflows into major exchanges over the weekend further fuel speculation that large institutional holders, or ‘whales,’ may be preparing to liquidate their holdings.
As November draws to a close, market attention remains firmly fixed on developments within the U.S. economy. Last week saw the unexpected cancellation of several key economic data releases, unsettling investor sentiment. This was followed by the decision not to publish October’s Consumer Price Index (CPI) data. Furthermore, there’s a risk that Wednesday’s crucial Core Personal Consumption Expenditures (PCE) data could also be withheld. The absence of both CPI and PCE figures would profoundly impact the Federal Reserve’s December policy meeting, introducing significant uncertainty and acting as a potential ‘market bomb’ for the week ahead.
Another critical factor to monitor this week is the balance of the Treasury General Account (TGA) as the month concludes. As reported by Reuters last week, funding costs in the U.S. overnight repo market continue to climb, and despite recent easing measures by the Federal Reserve, these costs are projected to remain elevated through year-end. This situation undoubtedly places additional strain on an already delicate financial market. A persistently high TGA balance would indicate that significant liquidity has yet to return to the broader market, which could negatively influence overall market sentiment. However, with the Federal Reserve’s quantitative tightening (QT) program scheduled to conclude in December, there’s an anticipation that the government will begin injecting liquidity into the market. This potential influx of capital could lead to an improvement in market conditions by early December, setting the stage for a traditional ‘Christmas rally’.
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