Crypto rout tests risk appetite as Fed cut debate heats up; dollar steady, stocks climb, oil rigs rise
A sharp crypto selloff and more than $500 million in forced liquidations rattled risk assets even as global stocks pushed higher on dovish-rate hopes. Traders are now focused on Jerome Powell’s guidance, oil supply signals, and a split inside the Federal Reserve over how soon to cut.
Key Points
- Bitcoin, Ether and XRP slid amid roughly $500 million in liquidations; BTC slipped below a key psychological level, heading for a weekly loss.
- U.S. equities advanced despite crypto turbulence, with investors leaning into a soft-landing narrative.
- Fed officials appear divided on the timing and pace of rate cuts; Morgan Stanley expects a 25 bp move, but upside to risk assets may be limited.
- Average U.S. tax refunds are projected to jump by $1,000+ in 2026, a possible boost to consumption and household deleveraging.
- U.S. oil rigs rose by 6 to 413, flagging potential supply growth and volatility for crude; traders eye inventory data.
- Softs diverged: cotton futures fell as managed money stayed net short ~74k contracts; coffee rose on Brazil dryness; wheat eased on ample supply and headlines around possible talks.
- Lean hog futures gained about $1.05 on the week even as managed money trimmed longs.
Markets wrap
Global stocks extended gains as falling volatility and rate-cut expectations outweighed a crypto drawdown that sparked more than half a billion dollars of liquidations across major tokens. The U.S. dollar was broadly steady, with FX ranges tight as traders awaited fresh guidance from the Fed and high-frequency inflation signals. Risk appetite was resilient in equities, but cross-asset tone was mixed: crypto weakness contrasted with a modest bid for defensives and income plays.
Crypto: forced selling pressures majors
A wave of liquidations hit digital assets, driving Bitcoin, Ether and XRP lower and nudging BTC below a notable round-number threshold. Leverage resets amplified the move, and positioning suggests a weak close to the week. The episode tightened financial conditions in the crypto complex, though spillovers to broader credit and equities remained contained.
Fed: split views on cuts, Powell in focus
Reports of an internal divide at the Federal Reserve over the cadence of policy easing kept rates markets cautious. Morgan Stanley is calling for a 25 bp trim, but any boost to risk assets may be capped if Powell emphasizes data dependency and inflation asymmetry. For FX, a slower, shallower cutting path would tend to support the dollar at the margin, while a more confident pivot could favor high-beta and carry currencies.
Macro tailwind in 2026: larger tax refunds
Forecasts indicate average U.S. tax refunds could increase by more than $1,000 in 2026, potentially lifting consumer spending and helping households pay down debt. The macro effect depends on the saving-spending split: a higher propensity to consume could support services activity, while deleveraging would tighten consumer credit spreads and temper demand-side inflation.
Equities: defensives and quality growth in vogue
Dividend stalwarts Coca-Cola (KO), Walmart (WMT) and S&P Global (SPGI) remain in focus as “Dividend Kings” with five-year EPS growth above 10% and supportive analyst ratings. In a late-cycle backdrop with moderating inflation, quality balance sheets and consistent cash returns continue to attract flows, even as cyclicals respond to rate expectations.
Commodities: rigs tick up, softs split
– Crude oil: U.S. oil rigs rose by 6 to 413, signaling potential output growth. The shift comes as traders parse inventory data and OPEC+ discipline. Options skew implies event risk around inventory surprises, with macro-sensitive demand the swing factor for flat price.
– Cotton: Futures eased 15–30 points as managed money maintained a large net short (~74k contracts), leaving the market vulnerable to short-covering on weather or demand surprises.
– Coffee: Prices climbed on continued dryness in Brazil, with supply concerns underpinning spreads and drawing in momentum buyers.
– Wheat: Futures slipped on ample global supply and headlines around potential talks, reinforcing bearish sentiment in the balance sheet.
– Livestock: Lean hog futures added about $1.05 on the week even as speculative length was trimmed, hinting at improving fundamentals.
FX lens: what it means for currencies
– A cautious Fed pivot tends to keep the USD underpinned versus low-yielders but offers scope for selective carry in commodity FX.
– Oil-sensitive currencies may see two-way trade as rising U.S. rigs cap crude rallies while inventories drive day-to-day volatility.
– Softs-linked exporters (coffee, cotton) could see supportive trade balances if price strength persists, though weather remains the wildcard.
What’s next
– Powell’s remarks and upcoming inflation prints will set the tone for rates, equities, and the dollar.
– EIA inventory data and rig trends guide crude; watch positioning and option skew into the release.
– In ags, Brazil weather and Black Sea headlines remain key to price direction.
FAQ
Why did Bitcoin and major altcoins drop?
Leverage washouts triggered roughly $500 million in liquidations, accelerating downside in Bitcoin, Ether and XRP. The forced selling pushed BTC below a key psychological level and set up a weak weekly close.
How does a divided Fed affect FX and stocks?
If the Fed signals a slower or more data-dependent path to cuts, the U.S. dollar typically stays supported and equity upside can be limited. A clearer pivot to easing would favor risk assets and high-beta currencies.
What do rising U.S. oil rigs mean for crude prices?
More active rigs (up 6 to 413) point to potential supply growth, which can cap rallies. Near-term price action will hinge on inventory data, OPEC+ discipline, and demand trends.
Which commodities moved the most and why?
Cotton eased with funds net short around 74k contracts, coffee rose on Brazil dryness, and wheat fell on ample supply and headlines about potential talks. Lean hogs gained about $1.05 on the week as fundamentals improved.
Will bigger 2026 tax refunds boost growth?
Likely at the margin. Larger refunds (projected +$1,000 or more) can lift consumption and help households pay down debt. The growth impulse depends on how much is spent versus saved.
What should traders watch next?
Powell’s guidance on cuts, U.S. inflation data, EIA inventories for oil, Brazilian weather for coffee, and positioning in cotton and wheat. For FX, monitor dollar reactions to rates repricing and commodity-linked moves in CAD, NOK, AUD and BRL.
This article was produced by BPayNews for informational purposes and should not be considered investment advice.
Last updated on December 6th, 2025 at 05:42 am
