After experiencing a sharp sell-off last week, cryptocurrencies are showing initial signs of stabilization. On Monday morning, prices rebounded from a low slightly above 80,000, trading close to 88,000. With Federal Reserve Chairman Williams rekindling expectations for a rate cut in December, the market entered the Thanksgiving holiday week with some cautious optimism. A strong stock market rebound (S&P 500 +1.5%, Nasdaq +2.7%) and early rebalancing fund flows as the month-end approaches also helped boost risk sentiment.
Risk sentiment has broadly improved, with BTC options open interest slightly turning positive and the put/call ratio for options expiring at the end of the month being around 0.67. A large number of put options have strike prices concentrated around 80,000, with bearish skew being actively bought, while call options are being heavily sold. The market undoubtedly feels better hedged against further declines, allowing it to enjoy a rebound above the 82,000 support level.
Given that BTC and ETH have underperformed gold and the stock market this year, with the gap ranging from 30% to 60%, ETF fund flows have turned negative, with the total outflow for BTC and ETH's ETFs amounting to about $5 billion so far in November, marking the worst performance of the month to date. In contrast, stock ETFs have recorded over $96 billion in inflows so far this month. Interestingly, retail investors seem to be beginning to differentiate between the risks of cryptocurrencies and stocks, selling the former and buying the latter.
Worse still, there is increasing discussion that Bitcoin mining is no longer profitable at current levels, and existing miners are becoming more aggressive sellers, shifting some of their hash power to the AI sector (like everyone else). This has intensified concerns that the market will face steadfast sellers from miners, OG whales, underwater market makers, and overvalued protocols, driving current fear sentiment to unprecedented negative levels.
Nevertheless, the market is currently in a severely oversold condition from both emotional and technical perspectives (such as Bollinger Bands). Unless new external factors arise (for example, forced selling by DAT), prices are likely to have reached a local low. We expect prices to fluctuate between 82,000 and 92,000. The next significant price support level is around the 78,000 area, and a sustained drop below this level would open up greater downside potential, but this is not our baseline scenario at the moment.
Looking ahead, this week's data is very busy, but given that the Federal Reserve has conveyed its easing intentions, this data is unlikely to significantly change recent risk sentiment. The US stock market remains in an upward trend, and positive seasonal factors will be favorable until the end of the year.
The cryptocurrency market seems to have reached a local low, but we need prices to firmly break above 92,000 in order to repair some of the recent technical damage and signal a further rebound.
Good luck and happy trading.
