4 Reasons Crypto Market Hasn’t Recovered Yet

Key Notes

• Even though the Fed ended QT, it is not enough to inject the liquidity that the crypto market needs.
• Crypto market liquidations and ETF outflows are another reason behind market selloffs.
• Ted Pillows also pointed to persisting macroeconomic and geopolitical headwinds.

The crypto market is struggling to remain stable, even amid a couple of positive macroeconomic narratives, such as the US Federal Reserve’s 25-basis-point rate cut.

Popular crypto analyst Ted Pillows has posted to explain the possible cause of the current sector-wide downtrend.

Positive Happenings in the Crypto Market

Last week, the broader financial sector saw several key events that disrupted normal operations. First, the United States Federal Reserve announced a 25-basis-point rate cut after much anticipation.

Around the same time, the Fed also ended Quantitative Tightening (QT), halting its balance sheet drawdown.

Also, there was a strategic de-escalation in US-China trade tensions and the approval of an altcoin staking Exchange Traded Fund (ETF). Amid this positive momentum, the expectation is that the crypto market will rally. However, that has not happened.

The historical Uptober ended in the red for the crypto market for the first time in seven years. Now, crypto enthusiasts are wondering why the market has yet to recover from the downtrend.

Ted Pillows explained the situation, noting that halting Quantitative Tightening did not amount to injecting new money into the economy. On this basis, liquidity conditions in the market have yet to shift, and cryptocurrencies require sustained inflows of new liquidity.

Previously, Ted had suggested the altcoin market needed some liquidity, which could happen in two ways.

He said it is either the Fed “start QE or the Treasury needs to release TGA liquidity into the economy.” Although when he considered the current crypto market outlook, the analyst noted that the first scenario is unlikely in the near term.

Insufficient Momentum to Power Crypto Market Rally

According to Pillows, the second reason the crypto market has failed to rebound is the failure of sentiment and risk appetite to push past a state of depression.

Given the high stablecoin dominance, it is clear that both retail and institutional investors are taking a cautious approach. They’d rather wait for the market to clear than dive right back in with uncertainty.

There is also the constraint of recent crypto market liquidations and ETF outflows. As of November 4, the digital asset ecosystem has recorded liquidations totaling $1.33 billion, with BTC, ETH, DOGE, and XRP leading the losses. This situation has reduced leverage across derivatives and spot markets.

Finally, Ted discussed the persistent macroeconomic and geopolitical headwinds in the market. Due to inconsistencies and fluctuations, the positive sentiment in the crypto industry is not sufficient to trigger a rally.

nextDisclaimer: Coinspeaker is committed to providing unbiased and transparent reporting. This article aims to deliver accurate and timely information but should not be taken as financial or investment advice. Since market conditions can change rapidly, we encourage you to verify information on your own and consult with a professional before making any decisions based on this content.