Market Compass
Digital Assets Under Pressure
Following an October that began but never ended, the bloodletting in cryptocurrencies continued into November. Particularly after the storm that followed President Trump’s October 10 tariff announcement, the pressure persisted due to several different dynamics. The scenario remained the same for the week we are about to leave behind.
As you may recall, despite some progress, the meeting between Trump and Chinese leader Xi did not result in a final decision to end the trade wars. Subsequently, the Chairman of the US Federal Reserve (FED) signaled that a new interest rate cut at the Federal Open Market Committee (FOMC) meeting in December was not guaranteed. Along with these factors, as the debate over whether there was an AI bubble in the US stock markets grew louder, we witnessed days of significant value losses on Wall Street, which negatively impacted risk appetite. Furthermore, the US government remains shut down, marking the longest shut down in history. According to some reports, the country is experiencing the highest layoffs in the retail sector and government in the last twenty years. Furthermore, the U.S. Supreme Court is evaluating whether the comprehensive tariffs imposed by Trump based on the emergency law constitute an abuse of authority, which is a closely watched issue. The resulting collective psychology led to an increased tendency among investors to pull back from the table and sell relatively risky assets, including cryptocurrencies. Bitcoin tested below the critical threshold of $100,000 during the week. Except for a brief rebound on Wednesday, it closed lower every day of the week (and was trading in negative territory on Friday as well, at the time of writing).
We maintain our long-term bullish outlook for major digital assets. However, we are concerned that the gains seen over the past year, driven by President Trump’s promises, actions, and stance toward the sector, may be somewhat jeopardized following the November 4 gubernatorial and mayoral elections. However, this is currently relevant for a very distant investment horizon, and we believe it is beneficial to include it in our notes, so it will remain a variable in our equation.
Let’s make a projection for the coming week. First, let’s remember that Tuesday is a public holiday in the US. Banks, federal offices, and bond markets, the playground of major investors, will be closed. However, stock markets will be open. Still, this is a situation that could lead to lower volumes on the first two trading days of the week globally and should be taken into account. On the other hand, due to the continued shutdown of the US government, we will most likely not receive important macro indicators. Although there have been some developments on this front, there is still no light at the end of the tunnel regarding when the government will reopen. In addition to the economic problems this will bring, we are unable to see data on the health of the world’s largest economy, making it even more difficult to project the Fed’s interest rate cut path. Within this limited universe, we believe we may see another challenging week for cryptocurrencies.
Under these conditions, we will be paying close attention to the statements of FOMC officials next week. At the time of writing this report, the CME FedWatch Tool priced in a 65% probability of an interest rate cut at the Fed’s December meeting. Statements regarding the Fed’s future stance, which will be decisive for the tightness of the global financial ecosystem, could impact asset prices. Additionally, developments regarding tariffs and new news flows concerning the possibility of the US government reopening will remain under our scrutiny.
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