The cryptocurrency market rebounded today, December 2, with Bitcoin and major altcoins rising over 1% in the last 24 hours, and the market cap of all tokens rising to nearly $3 trillion.
Summary
- The cryptocurrency market is rising today as liquidations subside.
- It also rose when the odds of the Federal Reserve cutting interest rates in December reached 90%.
- The ongoing bounce could be a dead cat bounce, also known as a bullish trap.
Crypto Market Rises, Liquidations Fall, Open Interest Rises
Bitcoin (btc) and other altcoins rallied as third-party data showed futures market activity modestly improved.
According to CoinGlass, liquidations fell 60% on Tuesday to $328 million, while futures open interest improved slightly to $125 million.
A drop in liquidations is a positive sign because it indicates that centralized and decentralized exchanges are forcibly closing fewer bullish trades.
Still, there are signs that cryptocurrency investors are worried about liquidations, especially after the October 10 event that wiped out more than 1.6 million traders. Total settlements that day amounted to more than $20 billion, the worst single-day performance.
Cryptocurrencies Rally as Federal Reserve Cuts Odds to 90%
The cryptocurrency market rallied as investors bet that the Federal Reserve will cut interest rates by 0.25% at its meeting next week.
TO Polymarket survey with more than $212 million in assets shows the odds of a December cut increased to 90% from November’s low of less than 50%.
At the same time, the Federal Reserve has already ended its quantitative tightening, which caused its balance sheet to shrink by more than $2 trillion over the past two years.
At the same time, there are signs that the bank could soon begin quantitative easing, whereby it injects funds into the economy to stimulate growth.
In fact, the bank injected 13.5 billion dollars into the banking system through nightly repositories. This was a notable amount, as it was the second largest capital injection since the pandemic.
Possible dead cat rebound or bull trap
The cryptocurrency market is also rising as investors buy the dip, which is a common situation when assets plunge, as they did on Monday.
Therefore, there is a risk that the ongoing crypto bounce is a dead cat bounce, which is also known as a bull trap.
A DCB is a situation where a falling asset falls, briefly recovers, and then resumes the downward trend. It is known as a bull trap because it causes traders to believe that a bull market is forming, only for prices to resume their downward trend.
The cryptocurrency market has had several bull traps in recent months. For example, it recovered from $98,990 on November 3 to $107,276 on November 11, and then resumed the downtrend.
