Key Takeaways
- •Federal Reserve liquidity operations signal a positive outlook for crypto and risk assets, with December's total nearing COVID-19 era levels.
- •Market sentiment remains focused on anticipated interest rate reductions, despite speculation surrounding Japan's financial policies.
- •Analysis suggests Bitcoin could serve as a leading indicator for a significant downturn in broader risk assets.
Fed Repo Operations Exceed Dot-Com Bubble Heights
Federal Reserve data, shared via analytics platform Barchart on X, indicates a halt to the recent phase of quantitative tightening. Bitcoin and other risk assets are poised to benefit from a renewed liquidity impulse as the Fed ceases to reduce its balance sheet this month.
The most recent figures detailing overnight repurchase, or repo, transactions reveal that $13.5 billion in liquidity was infused into the banking system on Tuesday. This figure is notable, representing the second-largest overnight sum since the onset of the COVID-19 pandemic, which triggered a global stock market downturn.
"Probably Fine, carry on," commented Barchart on X, highlighting that the total liquidity injection surpassed even the peak levels observed during the dot-com bubble era.
This development occurs at a sensitive juncture for global central bank easing efforts throughout 2025. Concerns regarding Japan's financial stability have fueled expectations that its central bank might tighten monetary conditions this month, as previously reported by Cointelegraph.
Concurrently, market participants anticipate that the Federal Reserve will lower interest rates at its December 10 meeting and continue this trend into the following year, a factor crucial for risk-asset liquidity.
"With December historically one of the strongest months for the market, upside momentum is strong," trading resource The Kobeissi Letter observed regarding US stocks on Tuesday. "The bulls are in control."
The bulls are in control.
Bitcoin's Potential Role in Risk-Asset Reversion
Despite the optimism surrounding equities capitalizing on existing 2025 gains, the cryptocurrency market continues to exhibit a diverging, increasingly bearish trend.
For Mike McGlone, senior commodity strategist at Bloomberg Intelligence, this divergence may signal an impending downturn for risk assets in general.
"Extreme stock market complacency may suggest further downside in risk-assets, with Bitcoin leading the way," McGlone stated on X on Monday.
McGlone cited historical valuations of Bitcoin relative to gold as a basis for expecting a downward "reversion." If the Bitcoin-to-USD ratio were to trade at approximately 13 times that of gold, it would imply a Bitcoin price just over $50,000.
"At about 20x on Dec. 1, the Bloomberg Economics’ model shows the Bitcoin/gold cross fair value closer to 13x and a top reason to get there -- S&P 500 120-day volatility is approaching its lowest year-end since 2017," he reported.
