"RBC-Crypto" does not provide investment advice, the material is published for informational purposes only. Cryptocurrency is a volatile asset that can lead to financial losses.
All attention of the crypto market has shifted to the actions of financial regulators from the US and Japan, note experts from the market-making company Wintermute. They believe that the digital asset market is in a wait-and-see position, where "macroeconomic events will determine" the next movement of quotes. And expectations for the Bitcoin price by the end of the year are divided between forecasts of $85K and $100K.
"Recent price dynamics reflect more of a pause, not a reversal. Activity has narrowed to the most liquid segments of the market [Bitcoin and Ethereum] ahead of clarity in policy," the analytical note states.
The last two months have been an uncertain time for the market, but in the past two weeks, cryptocurrencies have begun to show resilience to negative factors, writes Wintermute. This happened just before important decisions on interest rates by the US Federal Reserve (Fed) on December 10 and the Bank of Japan on December 19.
The essence of the expectations regarding interest rates in these two countries is that the Fed may lower its rate, which could potentially improve the investment climate through more accessible lending. But there are expectations that the Bank of Japan, in turn, will raise its interest rate.
This is important because Japan is the largest foreign holder of US government debt, ahead of China. In addition, for about the past 20 years, Japan has been predominantly in conditions of near-zero or even negative rates. But since 2024, they have raised the rate to 0.5%, and experts fear stress arising from another increase.
Modern US monetary policy assumes that the interest rate is the main tool for controlling the state of the entire financial system. Any changes to the rate affect not only the banking sector but also the country's economy as a whole, the investment climate, the stock and other trading markets, including the cryptocurrency market.
Meanwhile, experts note a split in the expectations of options traders regarding the Bitcoin price, where a mass of bets is divided: $85K or $100K by December 26.
Wintermute's words about "narrowing liquidity" are confirmed by a general drop in trading volumes on spot and futures crypto markets, noting a decline of up to 30% compared to October.
Wintermute explains this by a decrease in interest in cryptocurrencies other than Bitcoin (altcoins) due to a flow of liquidity into fixed-income instruments rather than speculative ones.
In previous reports, Wintermute pointed to liquidity flows as the main driving force of the crypto market under current conditions. In the current report, they reiterate their thesis that, in the absence of "macroeconomic surprises," cryptocurrency volatility will be determined more by liquidity than by fundamental factors.
Why crypto projects with millions in investments earn less than $100
Only 7 native tokens remain in the green since the beginning of the year. And it's not Bitcoin
"The disappointment phase". What will happen to cryptocurrencies this week
Record on prediction platforms. What companies are in the crypto market
