Crypto Market Stability Observed by Coinbase Analysts
The crypto market is showing renewed stability after a week of heightened volatility, according to analysts at Coinbase. This improved equilibrium largely hinges on investor reactions to upcoming macroeconomic developments.
Coinbase analysts David Duong and David Han stated, "We believe the market is now directionally more balanced as investors digest numerous potential macro catalysts." This balance is reflected in the proportional bid/ask depths of Coinbase’s BTC/USD order book.
Earlier this week, significant volatility was noted, with over $700 million in long liquidations during Tuesday's sell-off, triggered by escalating geopolitical tensions in the Middle East.
“Bitcoin's decline on Tuesday resulted in the highest weekly level of liquidations since early August,” the analysts reported. They referred to an event in early August when bitcoin dropped from $70,000 to below $50,000 due to global market pressures.
The analysts emphasized that since the sell-off, reduced leverage has led to annualized bitcoin and ether perpetual futures funding rates decreasing from a two-month high of 10-11% to 5-7%, contributing to a stabilized market.
Investors may adopt a "wait and see" approach regarding U.S. Federal Reserve monetary easing. The recent hawkish remarks from Fed Chair Jerome Powell have negatively impacted the cryptocurrency market.
Analysts predict ongoing focus on U.S. monetary policy, particularly with unclear labor data affecting market direction. They also noted that upcoming U.S. presidential elections could significantly impact the market.
“Both political parties have shown supportive rhetoric toward cryptocurrencies, suggesting a more favorable regulatory environment could emerge next year,” the analysts concluded.
The CME FedWatch tool indicates a 92.5% probability of a 25 basis-point cut by the Fed next month, likely increasing market liquidity and encouraging investments in risk-on assets like bitcoin and ether.
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