Key Observations

• The fall in Bitcoin (BTC) and Ethereum (ETH) contrasts with a robust stock market, signaling fragile investor sentiment, despite a more favorable outlook for liquidity.

• Economic instability lingers, but anticipated monetary easing could mitigate downside risks for cryptocurrencies, potentially spurring bullish trends.

On Wednesday, Bitcoin and Ether saw momentum, reaching two-week highs, as investors anticipated more expansive monetary policy. Weak economic signals have led to rising expectations for fresh economic stimulus, boosting interest in rare assets.

The S&P 500 and gold also showed positive responses as investors looked forward to increased market liquidity. However, Bitcoin and Ether traders remain cautious, aware of the potential for corrections due to ongoing economic uncertainties. Currently, the crypto market cap sits about 29% below its peak of $4 trillion.

There was a noticeable increase in demand for rare assets on Wednesday, evident in the rise of five-year U.S. Treasury notes and a 3% uptick in gold prices over the last two weeks, nearing $4,240. Bitcoin’s price is around $93,000, holding steady from two weeks ago. In contrast, Ether remains 37% below its all-time high of $4,956, which is causing traders to rethink their outlook on the altcoin scene.

The labor market in the U.S. seems to be slowing down, with private companies eliminating 32,000 jobs in November, particularly impacting small businesses. The ADP payroll report indicates a slight dip in wages, down by 0.1% since October, which may help alleviate inflation worries. Now, traders are closely watching the Federal Reserve’s interest rate decision set for December 10, hoping for clearer policy guidance.

Potential Benefits for Cryptocurrencies

Fed officials have shown some division in their views, partly due to the absence of official U.S. government statistics, as the funding shutdown occurred. Some believe rate cuts are essential to avert a serious downturn in the labor market. Still, there’s a cautionary stance arguing that lower rates may exacerbate inflation, which is significantly above the Fed’s 2% target.

Additionally, the growing dependency on investments in artificial intelligence by major corporations adds another layer of uncertainty. Jean Boivin from BlackRock noted the concerns of a possible bubble, with many being aware of the associated risks. Reports from Yahoo Finance emphasized the physical constraints surrounding large-scale AI data center expansion.

Macy’s, a prominent U.S. department store chain, indicated that its forecast is affected by cautious consumer spending and escalating tariffs, which might impact its performance in the last months of 2025. CEO Tony Spring stated in a CNBC interview that the retailer has had to implement “selective” price increases across most product categories.

Interest in bullish leveraged positions on Bitcoin and Ether remains notably low. Under normal conditions, the annualized funding rates for perpetual contracts should range between 6% and 12% to account for capital costs. This lack of confidence is significant, especially since the Russell 2000 small-cap index is just 2.3% shy of its all-time high.

Going forward, stock markets might benefit directly from expansionist monetary policy through lower capital expenses and government incentives for areas like AI and nuclear infrastructure. Lacking a shift in sentiment, cryptocurrencies may continue to lag as job market conditions deteriorate and uncertainty grows.

Even with weak labor and consumer data, cryptocurrencies don’t seem on the brink of collapse. The anticipated liquidity increase could alleviate economic pressures, sustaining demand for scarce assets. If financial conditions stay supportive, Bitcoin and Ether are likely to experience a gradual recovery rather than facing significant downturns.