"A rocky November may have set the stage for a December to remember," stated Coinbase Institutional on Tuesday. The firm noted that its "systemic leverage ratio," which tracks purely speculative positioning, has stabilized at around 4% to 5% of total market capitalization, a decrease from 10% this past summer. This cautious optimism stems from the fact that "speculative excess has been flushed out," leading to a healthier market structure.
"Lower leverage = healthier market structure + less vulnerability to sharp drawdowns heading into year-end."
December Shaping Up for a Santa Rally
Bitcoin experienced its second-worst November on record, with a 17.7% loss over the month. This performance trails only November 2018, when the asset saw a 36.6% decline, according to Coinglass. Historically, November is typically the best-performing month for Bitcoin.
December is showing a more positive trend so far, with BTC up 2.3% this month. However, this current gain is significantly lower than the impressive 47% surge recorded in December 2020.
Bitcoin reached a three-week high of $94,500 in late trading on Tuesday. Despite this peak, the price retreated to $92,400 during the Asian trading session on Wednesday morning. This movement occurs as the Federal Reserve is anticipated to announce a rate cut later today, although analysts suggest that markets have already factored this event into pricing.
Spencer Hallarn, Global Head of OTC at crypto capital markets partner GSR, echoed Coinbase's sentiment, stating, "I think we’ve shaken out a lot of the bulls and built a solid base of skepticism."
"Perpetual funding rates are very low or negative, which suggests there isn’t much leverage in the system. Taken together, that setup looks pretty bullish for a Santa rally. I think EOY is looking good."
Correlations With US Stock Markets
According to Michaël van de Poppe, founder of MN Fund, Bitcoin is currently undervalued relative to the Nasdaq and high-beta tech stocks, presenting a near-term buying opportunity. He noted that while the Nasdaq has demonstrated resilience, Bitcoin has not kept pace despite their historical correlation, creating a pricing discrepancy. The recovery observed in high-beta stocks indicates a renewed risk-on appetite in the markets, which traditionally aligns with Bitcoin rallies, a perspective that leads him to dismiss the four-year cycle thesis.
"In that light, in the coming few weeks, perhaps months, it’s very likely to see Bitcoin grind back upward to the levels of $110K-$115K, inversing the entire loss as the entire correction was a little dubious."