Crypto markets staged a convincing comeback on November 27, ending a prolonged period of stagnation as a critical shift in U.S. liquidity forced capital to shift to risky assets.
While the price action saw Bitcoin rise 5% to reclaim the psychologically vital $90,000 threshold and Ethereum clear $3,000 for the first time in a week, the real story lies in the fact that the rally brings much-needed relief to a market that has been down for a month.
Indeed, the extent of the recent capitulation is evident in the mediocre results. Data from Santiment shows that, until this week, losses among average portfolio investments in major digital assets were deeply underwater.
According to the company, Cardano investors had lost an average of 19.2% of their value, Chainlink traders were down 13.0%, and even market leaders were underwater, with ETH and Bitcoin suffering losses of 6.3% and 6.1%, respectively. XRP is doing slightly better but remains down 4.7%.
Thus, the current 3.7% increase in total crypto market capitalization appears driven less by sector-specific news than by a structural reopening of the fiscal spigot, combined with a sudden thaw in risk appetite among institutional allocators.
Why the crypto market has recovered
To understand the mechanisms of this rally, we must look beyond the order books and the balance sheet of the US Treasury.
In an article X, asset management firm Ark Invest explained that the main catalyst for this reversal was the normalization of liquidity following the resumption of US government operations.
The six-week government shutdown, which ended recently, had the effect of massively draining the financial system, effectively siphoning off around $621 billion in liquidity. This contraction left markets dry, reaching a multi-year liquidity low on October 30.
However, the reopening of federal operations has begun to reverse this dynamic. Even though around $70 billion has been put back into the system so far, the “tank” is still too full; The Treasury General Account (TGA) currently holds high balances close to $892 billion.
Compared to a historical benchmark of $600 billion, this gap suggests that a massive deployment of liquidity is imminent.
So, as the Treasury normalizes this account over the coming weeks, this excess capital will be mathematically forced to flow back into the banking sector and the economy as a whole.
For macro-conscious cryptocurrency traders, this represents a predictable wave of liquidity that historically supports risky assets first.
Meanwhile, fiscal tailwinds are accompanied by a shift in monetary messaging.
Ark noted that the “higher for longer” rhetoric that had capped the rise earlier in the quarter effectively dissolved this week as a chorus of Federal Reserve officials, including Gov. Christopher Waller, New York Fed President John Williams and San Francisco’s Mary Daly, telegraphed their willingness to cut rates.
This coordinated dovish stance has reduced the probability of a short-term rate cut to almost 90%.
Given this, the company highlighted a crucial timing convergence: the TGA liquidity injection is expected to align with the planned conclusion of quantitative tightening (QT) on December 1. The firm noted that removing runoff from the Fed’s balance sheet removes a lingering drag on liquidity, creating a setup in which beta assets face fewer headwinds.
Return on institutional interests
In addition to strong liquidity, institutional flows painted a nuanced picture of the positioning of distributors for the end of the year.
Spot ETFs have seen a clear rotation towards Ethereum. For the fourth consecutive session, ETH products attracted net inflows, totaling approximately $61 million, according to data from SoSo Value.
At the same time, Bitcoin funds saw more modest inflows of around $21 million, while XRP investment vehicles added around $22 million. Conversely, Solana products faced headwinds, with $8 million in redemptions.
This flow profile suggests that the current rebound is a “repair” operation rather than a speculative frenzy.
Timothy Misir of BRN said CryptoSlate that even though buyers have re-engaged, volumes remain relatively low. At the same time, he highlighted that open interest rates have not increased significantly, despite perpetual futures funding rates returning to positive territory.
This lack of froth is constructive, because it implies that weak hands are gone and accumulation is occurring without the dangerous leverage that often precedes a crash.
Risks ahead
For crypto traders, the immediate priority is whether this liquidity-fueled rebound can turn into a sustainable trend, as significant risks loom.
Misir stressed that the “moving factor” remains the macro environment, as a high inflation figure could force the Fed to reverse its accommodative signals, instantly tightening conditions.
Additionally, the approaching holiday season often leads to dwindling order books, where lower liquidity can exacerbate volatility. At the same time, a sudden increase in FX deposits would indicate that whales are using this liquidity event as exit liquidity rather than an entry point.
Considering this, Misir concluded that if Bitcoin can hold the $90,000 line, the leading asset could see the $95,000 zone as its next major test.
However, failure in this case would likely result in a pullback towards the $84,000 pivot zone.
