After an active morning, Bitcoin In U.S. afternoon trading, the dollar was little changed in the $87,500 area, having held gains around 2% in the past 24 hours. Altcoins, including Ethereum , and Solana Exhibiting similar upward momentum.
Cryptocurrency-related stocks also rebounded after Monday’s plunge, with Strategy (MSTR) rising 3% and Coinbase (COIN) rising 1%.
Read more: Bitcoin bounces back from Monday’s worst levels, but could fall below $80,000 next, analysts say
“Clients are cautiously optimistic,” said Josh Barkhoarder, head of sales at FalconX. “In the short term, most expect cryptocurrencies to remain range-bound until we see a clear catalyst, so they hold core Bitcoin exposure and hold cash elsewhere.”
Analysts say Bitcoin could benefit from rebalancing
Vetle Lunde, head of research at K33, noted that as the end of the year approaches, Bitcoin may benefit from the quarter’s subdued performance relative to other asset classes as asset managers rebalance their portfolios to maintain their fiat allocations.
Lunde said that earlier this year, when BTC lagged the S&P 500 in the first quarter, it started to rise in the following quarter. Conversely, when Bitcoin outperformed stocks in the second quarter, it fell early in the third quarter.
Bitcoin has lagged the S&P 500 by a whopping 26% so far in the fourth quarter, suggesting a massive rebalancing is coming.
Lund continued: “Fund managers with predetermined Bitcoin allocation targets may adjust weightings at the end of the year, which may lead to excessive inflows in the final trading days of the year and early January.”
Cryptocurrency traders are hesitant
K33’s Lunde added that while prices have stabilized, market participants remain reluctant to take on new risks.
He wrote that derivatives activity on the Chicago Mercantile Exchange (CME) remains near yearly lows, with BTC futures open interest hovering around 124,000 BTC. In the perpetual swaps market, funding rates are hovering around the neutral rate and open interest is barely moving, indicating a lack of short-term directional conviction.
The decline in spot cryptocurrency trading volumes, down 12% as of last week, also confirms that many traders remain reluctant to participate as the year draws to a close.