As December unfolds, both macroeconomic and cryptocurrency markets are entering a crucial period marked by significant data releases and uncertainty regarding future policies. In a recent analysis, HTX Research analyst Chloe (@ChloeTalk1) highlighted how forthcoming macroeconomic indicators could significantly impact expectations for the Federal Reserve’s meeting in December, potentially serving as a key driver of risk sentiment across equity and digital asset markets.
Critical Data to Shape Rate-Cut Expectations
Market speculation suggests that the Federal Reserve may announce another interest rate cut in December. However, Federal Reserve Chairman Jerome Powell cautioned last week that ongoing government shutdowns have created gaps in available data, limiting policymakers’ access to complete indicators regarding the labor market and inflation prior to the meeting. The upcoming cluster of high-frequency data will be instrumental in determining whether the probability of a December rate cut retracts to around 50% or surges close to 100%.
The first major economic release to watch is the November ISM Manufacturing PMI. Manufacturing has been in contraction since March, with the previous month’s reading at just 48.7. The sub-indices for new orders and employment also remained below 50, indicating persistent uncertainty stemming from tariffs and diminishing global demand. In contrast, the Services PMI has shown moderate growth, holding steady at 52.4, although its price sub-index remains elevated near 70, suggesting that inflation pressures are now more influenced by domestic services rather than imports. Should the services index continue to show resilience, it could bolster hawkish sentiments within the Federal Reserve. Conversely, a drop in the index to 50 or below would likely solidify expectations for a rate cut.
The labor market is poised to be a pivotal factor in this economic landscape. With the nonfarm payrolls report for October cancelled and the November figures postponed until December 16, the upcoming ADP private-sector employment report will be crucial. October’s ADP report indicated an addition of 42,000 jobs, exceeding expectations. A stronger-than-anticipated November reading could challenge the case for immediate easing, while a weaker report would support the argument for more prompt policy accommodation.
Another key indicator to monitor is the Challenger layoffs report, which recorded a surge in October layoffs to 153,074, the highest figure in 22 years. If layoffs continue to rise in November, markets could quickly reassess the risks associated with a downturn in the U.S. labor market.
On Friday, attention will turn to PCE inflation and personal spending data, the most significant macroeconomic event of the week. Markets anticipate that the headline PCE for September will rise slightly from 2.7% to 2.8%, with core PCE expected to remain at 2.9%. If inflation remains around the 3% mark, the pace of rate cuts could be restrained. Conversely, softer PCE results could provide short-term relief for the markets.
Market Sentiment and Bitcoin’s Position
Despite some recovery, risk appetite remains subdued in U.S. equities. Goldman’s trading desk noted that as market volatility diminished and breadth improved, systemic selling pressure was largely alleviated by mid-November. Institutional positioning models now forecast a transition from net selling to approximately $4.7 billion in net buying for December. This suggests that the traditional “Santa Rally” remains a possibility, contingent on whether this week’s data supports a trajectory toward rate cuts.
In the cryptocurrency realm, Bitcoin has rebounded above $85,000 following a nearly 30% decline from its October peak. However, overall sentiment in the market remains fragile, with liquidity appearing thin. Exchange-traded funds (ETFs) continue to experience mild outflows, and the Coinbase premium remains weak, indicating a cautious stance among institutional investors. Options markets reflect a risk-averse posture, displaying significantly higher near-term implied volatility compared to long-dated options, alongside a negative skew for 25-delta puts across various maturities. This behavior suggests that investors are prepared to pay for downside protection, anticipating potential spikes in short-term volatility.
The cryptocurrency market is currently navigating a sensitive phase characterized by an unclear fundamental outlook, though some signs of bottom-forming are gradually becoming evident. If this week’s U.S. economic data reveal a combination of slowing growth without entering recession and softening inflation, Bitcoin and other major assets could experience a natural recovery. This scenario would likely lead to a quick compression of implied volatility and a resurgence of short-volatility strategies.
However, should manufacturing, employment, or PCE data surprise positively and dampen rate-cut expectations, the thin liquidity typical of the holiday season could precipitate another sharp downturn in prices. In this context, taking heavily one-sided bets carries significant risks. Current market structures exhibit gradual accumulation behavior near lower price ranges, while elevated short-term implied volatility allows for effective hedging strategies. The price range of $80,000 to $82,000 remains a notable support level, but a genuine trend reversal will hinge on clearer signals from this week’s macroeconomic releases.
*This article is not intended as investment advice and does not constitute an offer or solicitation for any investment product.
HTX Research serves as the dedicated research branch of HTX Group, which has evolved since its inception in 2013 from a virtual asset exchange into a comprehensive ecosystem of blockchain businesses. For further details, visit [HTX’s official website](https://www.htx.com/).
