This week in the crypto space, Bitcoin faced a turbulent few days as it dipped below $93,000 amidst widespread long liquidations, only to stage a strong rally back to $98,000 later in the week. Meanwhile, Ethereum appeared to be in a comeback phase. The market is closely watching how investor sentiment shifts with critical macroeconomic data releases and the U.S.holiday season impacting liquidity.
Macroeconomic Overview
Early in the week, Bitcoin slipped below the critical $93,000 mark, driven by more than $430 million in long liquidations. This pullback coincided with spot ETFs breaking their five-day streak of net inflows, registering a $438 million outflow on Monday, while MicroStrategy’s stock dropped by 4.4%. The pullback follows MicroStrategy’s massive $5.4 billion Bitcoin purchase, completed last week at an average price of $97,862 per BTC, as the company continues its aggressive BTC accumulation strategy.
Despite the pullback, this retracement doesn’t represent a major collapse, as BTC only retraced to levels seen early last week. With excessive leverage in the market post-election, a temporary breather was inevitable, and BTC has since found a comfortable position just above the $93,000 level. However, BTC showed resilience as it quickly rallied back towards $98,000 later in the week, demonstrating continued strong demand and investor confidence. The rebound was fueled by a combination of supportive macroeconomic conditions and ongoing institutional accumulation, including optimism from MicroStrategy’s recent large-scale purchases.
President-elect Trump’s nomination of Scott Bessent as Treasury Secretary boosted market sentiment, driving a broad rally across risky assets, including cryptocurrencies. Bessent’s “3 Arrows” strategy—focusing on a 3% budget deficit by 2028, 3% GDP growth, and increased oil production—has been well received by investors, pushing Wall Street indices to record highs.
Crypto Market Dynamics
The primary focus for crypto investors this week has been the ongoing battle for Bitcoin to reach the coveted $100,000 mark. Despite strong spot ETF inflows and continued institutional interest, the heavy sell wall at the $100,000 level has proven to be a formidable challenge for BTC bulls.
While Bitcoin struggled to break above the psychological milestone earlier in the week, it managed to recover towards $98,000, suggesting that bullish momentum remains intact despite recent setbacks. This sharp recovery was marked by renewed buying interest from both institutional and retail investors, with BTC showing strength in the face of macroeconomic uncertainty. The rally above $95,000 and back to $98,000 indicates that BTC’s upward trend isstill in play, and market participants are hopeful that a push to $100,000 could be imminent if supportive conditions persist.
At the same time, Ethereum (ETH) has started to shine again. ETH outperformed BTC, gaining over 4% on Tuesday while BTC lost 1.5%. The ETH/BTC pair surged by 13% over the week, climbing from a post-election low of 0.0318 to 0.0366, indicating increased capital flow into Ethereum as Bitcoin faces resistance.This rotation is not entirely unexpected, given that BTC dominance has declined from 62% to 59% over the past week. Investors are increasingly looking at altcoins, particularly Ethereum, as a potential beneficiary of profit rotation from Bitcoin. ETH ETFs have also continued to see healthy inflows, recording $90.1 million yesterday, marking a four-day streak of positive flows.
Flows and Market Activity
Paradigm flows this week pointed towards mixed sentiment, with both bullish and bearish activity across different tenors. Notable trades included a 650-lot BTC Dec-27 95k/105k call spread that was sold, and a 750-lot 6-Dec-24 86k/101k bear risk reversal that was bought. On the ETH side, flows leaned bullish, with 10,250-lot Mar-25 4k/5k call spreads bought and custom structures focusing on complex calendar and butterfly positions.
While backend vols remain elevated for Bitcoin, suggesting the market expects BTC to trade sideways into December, ETH risk reversals remain heavily skewed towards front-end calls. The market appears to be pricing in a potential shift in focus from BTC to ETH as we approach the end of the year.
In the broader altcoin market, XRP surged to a valuation of $1.70, the highest since May 2021, driven by optimism surrounding SEC Chair Gary Gensler’s anticipated resignation and rumors of a possible XRP ETF launch in the U.S.
Outlook
As we move into the final month of the year, the question remains whether Bitcoin can achieve the symbolic $100,000 milestone before year-end or if altcoins, particularly Ethereum, will continue to outshine BTC. The upcoming FOMC minutes and Core PCE data release will be crucial in shaping investor sentiment and market direction in the near term.
ETH’s recent strength, with consistent ETF inflows and outperformance against Bitcoin, makes it a key contender for leading the next leg of the crypto rally. Should Bitcoin fail to decisively break the $100,000 barrier soon, we could see a more substantial rotation into Ethereum and other altcoins.
In summary, the week saw Bitcoin face significant resistance at $100,000, only to rally back to $98,000, while Ethereum gained momentum and outperformed the broader market. Market participants remain focused on key macroeconomic data releases and potential policy shifts from the incoming administration, both of which could set the tone for the remainder of the year in the crypto market.
Comments