Bitcoin recently executed a surprising and dramatic rally, surging over 11% from its $84k low to reach the $94k resistance level in under 48 hours. This unexpected upturn caught many market participants off guard, particularly those anticipating a continued downtrend, leading to significant short liquidations across the crypto market. While impressive, this short-term volatility is influenced by a complex interplay of macro-economic factors that are tugging the market in multiple directions.
The Catalyst for the Surge
The sudden upward movement in Bitcoin, which typically leads the broader crypto market, can be attributed to several key developments. A notable factor was the reversal of Bitcoin ETF flows, which turned positive on November 25th and have remained so, indicating a shift from selling pressure. Additionally, the $88k mark proved to be a critical support level, according to the CVDD channel, providing a foundation for the bounce. Reports also suggest that the rally was significantly driven by a search for liquidity, as Bitcoin presented an opportunity for quick gains.
Macroeconomic Tailwinds
A major influence on the recent rally appears to be a shift in U.S. monetary policy. On December 1st, the U.S. Federal Reserve concluded its quantitative tightening (QT) program and initiated steps towards liquidity expansion, injecting $13.5 billion into the banking system. This injection likely boosted market sentiment and contributed to Bitcoin's rise. Furthermore, the high probability (89.1%) of a 25 basis point Federal Reserve rate cut in December is also fueling optimism, suggesting a more accommodative monetary environment ahead. While the Bank of Japan's tighter policies have historically led to crypto sell-offs, the dovish shift from the U.S. Fed is currently providing a strong counter-force, setting the stage for heightened volatility.
