Bitcoin and Ethereum Roar Back with Violent Upside Momentum
The bear market gloom lifted fast. Bullish catalysts kept coming, and what looks like the final phase of this mega bull run kicked off. BTC jumped from $82K to $94K overnight. ETH surged 5% in four hours. We’re seeing a new chapter unfold — the market’s waking up.
As shown in the chart below, Bitcoin and Ethereum closed their November monthly candles just before December 1st, then immediately plunged on a cascade of negative news. BTC dropped to $83K while ETH fell to $2.7K. However, sentiment reversed sharply after December 1st as bullish catalysts took over. Within just two days, Bitcoin recovered to $94K and Ethereum to $3.2K—representing a spot market gain of over 5%.
Why Did Ethereum Rebound So Aggressively?
As shown in the chart below, Ethereum’s upward momentum is far stronger than Bitcoin’s, contrary to its previous tendency to follow Bitcoin’s trend. Is the altcoin season really coming?
Deeper Decline Created Stronger Bounce Potential
Ethereum suffered a more severe drawdown than Bitcoin during the November selloff—plunging 45.2% from its highs compared to BTC’s 34% decline. This oversold condition created compressed spring-like buying pressure. When sentiment reversed on December 1st, ETH’s recovery was proportionally more violent as the asset had more ground to reclaim.
Fusaka Upgrade Catalyst: 89% Gas Fee Reduction
The Ethereum Foundation confirmed the Fusaka mainnet upgrade would launch on December 3rd, slashing Layer 2 gas fees by 89%. This major technical milestone reignited confidence in Ethereum’s scaling roadmap and DeFi ecosystem competitiveness, driving aggressive positioning ahead of the upgrade.
Institutional Capital Returned: $180M ETF Inflows
ETH spot ETFs flipped positive on December 1st with $180 million in net inflows, sharply reversing November’s brutal $1.64 billion outflow. With total institutional holdings exceeding $13 billion, this capitulation-to-accumulation shift signaled that smart money was buying the dip—triggering FOMO among retail traders and forcing shorts to cover.
The Perfect Storm
These three factors converged simultaneously: oversold bounce + concrete fundamental upgrade + institutional re-entry. The result: ETH surged from $2.7K to $3.2K in 48 hours, outpacing Bitcoin’s recovery.
Fed Halts QT, Liquidity Flows Back to Markets
On October 29, 2025, the Federal Reserve announced it will halt the reduction of its securities holdings starting December 1, 2025. This marks the end of the Quantitative Tightening (QT) program that began in June 2022, as money market conditions now indicate reserve levels have approached adequate levels under the Fed’s ample reserves framework.
$2.2 Trillion Reduction: Three Years of Balance Sheet Normalization
The QT program achieved significant balance sheet normalization over its three-and-a-half-year run. The Fed reduced total securities holdings by over $2.2 trillion, including approximately $1.6 trillion in Treasury securities and $600 billion in agency mortgage-backed securities.
As a result, Fed holdings as a percentage of nominal GDP dropped dramatically from 33% to 20%—a 13 percentage point decline that represents substantial monetary tightening.
The Methodology: Gradual Caps and Ample Reserves Framework
The reduction followed a structured approach announced in May 2022, with monthly caps starting at $30 billion for Treasuries and $17.5 billion for agency securities, later increasing to $60 billion and $35 billion respectively.
This gradual, predictable methodology aligned with principles established in January 2022, which positioned the federal funds rate as the primary policy tool while systematically reducing the balance sheet to levels sufficient for effective long-term monetary policy implementation under an ample reserves regime.
A Stumbling Block in the Bull Market Rally!
BOJ Governor Kazuo Ueda signaled his most hawkish stance yet, driving December rate hike odds above 80% according to overnight index swaps. BNP Paribas, Barclays, and JPMorgan now expect December action, though Goldman Sachs favors January.
This contrasts sharply with the Fed’s near-90% odds of a December rate cut, narrowing the US-Japan rate differential. The convergence threatens to unwind yen carry trades—where investors borrowed cheap yen to buy dollars—potentially triggering yen appreciation and market volatility. “The yen’s surge is once again rattling markets,” warn analysts.
BOJ Governor Ueda’s Hawkish Turn
Bank of Japan Governor Kazuo Ueda delivered his most explicitly hawkish signal to date, stating that the BOJ will consider the pros and cons of a December rate hike and make decisions accordingly. Market expectations have surged in response—overnight index swaps now show an over 80% probability of a BOJ rate hike in December.
“Ueda’s speech was essentially a preview of a December rate hike,” said economists at BNP Paribas. Analysts at Barclays and JPMorgan have also moved forward their BOJ rate hike projections from January 2025 to December 2024. However, Goldman Sachs remains cautious, suggesting the BOJ may still await more corporate wage data, making a January move more probable.
Widening US-Japan Policy Divergence
In stark contrast to the BOJ’s hawkish tilt, market bets on a Federal Reserve rate cut in December have climbed to nearly 90%. This divergence is narrowing the US-Japan interest rate differential, potentially triggering a new wave of carry trade unwinding—where investors borrowed yen at low rates to buy higher-yielding dollar assets.
Yen Strength Disrupts Markets Again
“The yen’s surge is once again rattling markets,” analysts warn. As the carry trade unwinds, yen appreciation could accelerate, creating volatility across global risk assets—particularly cryptocurrencies and equities that thrived during the era of cheap yen funding.
“The Bull Market Returns — But Not Without Risk”
Bitcoin’s $83K-to-$94K recovery and Ethereum’s explosive 18% surge confirm the bull run’s next phase has begun, powered by the Fed’s QT termination and $2.2 trillion liquidity restoration. Institutional capital is flooding back, with ETH ETFs reversing $1.64B outflows in a single day.
However, celebration must be tempered by caution: the Bank of Japan’s hawkish pivot threatens to unwind yen carry trades that funded this rally. With 80% odds of a BOJ rate hike against 90% Fed cut probability, macro divergence could trigger volatility reminiscent of October’s crisis. The bull market is back, but the BOJ holds the kill switch. The next two weeks are critical.