A crypto market rally remains elusive this week, even as a major catalyst, falling crude oil prices, has emerged. Bitcoin remains below the critical support level of $86,000, while the market cap of all coins has fallen by more than $1 trillion in recent months.
The price of crude oil fell
Data shows that Brent and WTI crude oil prices have been under intense pressure in recent months. Brent, the global benchmark, fell to $59.5, while WTI rose to $55.
Crude oil collapsed double-digits from its annual high due to supply concerns following increased production from OPEC+ members such as Saudi Arabia and Iran. The cartel has steadily increased production this year.
At the same time, there are signs that demand is starting to slow as China’s economy slows, with a report released this week showing that industrial production fell short of expectations.
Crude oil is also falling as investors predict Donald Trump will reach a deal with Russia to end the war in Ukraine. Such a move would lift sanctions against Russia and make it easier for the country to increase its oil exports to other countries. This would boost exports at a time of abundance in the oil market.
The only potential catalyst in the oil market today is Donald Trump’s announcement of a major blockade on ships entering and leaving Venezuela, the country with the most oil reserves. This explains why Brent and WTI rose slightly today.
READ MORE: Top Reasons Why the Pi Network Failed in 2025
Will this lead to a crypto market rally?
In theory, the decline in the price of crude oil should be bullish for the crypto market due to its impact on inflation in the United States and other countries.
Lower oil prices generally translate into lower gasoline prices. Indeed, data shows that gasoline recently fell to its lowest level in years in the United States.
On the other hand, lower gasoline prices lead to lower inflation in the country, which often prompts the Federal Reserve to begin cutting interest rates. The crypto market generally thrives in an era of easy money policies.
The Fed has already made three rate cuts this year and has begun implementing a policy of quantitative easing by purchasing $40 billion in government bonds each month.
Analysts expect the next U.S. inflation report, due Thursday, to show headline CPI remained at 3% in November.
A sign that oil prices are pushing inflation lower will raise hopes that the bank will make further cuts next year as the unemployment rate hits its highest level in years.
Nonetheless, the crypto market rally faces other major headwinds, including the Bank of Japan’s upcoming interest rate hike, declining futures open interest, and the formation of a bear flag on Bitcoin and Ethereum. In most cases, these trends typically lead to more downward pressure on assets.
Therefore, for now, the crypto market will likely remain under intense pressure even as oil prices continue to fall.
READ MORE: Solana Price Could Drop to $100 Despite ETF Inflows and Strong Network Growth
