TLDR
Bitcoin is trading around $90,000 as year-end liquidity dries up and traders expect a Federal Reserve rate cut this week
Open interest in BTC and ETH perpetual contracts has dropped by nearly half since October, weakening market absorption capacity
Traders have already priced in a 25 basis point Fed rate cut with 89% probability, focusing more on future guidance
Nvidia stock jumped over 2% after Trump approved sales of H200 AI chips to China with 25% payment to US government
Stock futures edged higher Tuesday morning with Nasdaq 100 futures leading gains ahead of Fed policy meeting
Bitcoin maintained its position near $90,000 on Monday as thin year-end market conditions created choppy trading for both crypto and stock markets. The stability came as investors positioned themselves ahead of the Federal Reserve’s final policy meeting of 2025.
Trading activity has seen a sharp decline in recent months. According to QCP Capital, open interest in perpetual futures contracts for Bitcoin and Ethereum has decreased by approximately 50% since October.
The reduction in open interest indicates weaker market capacity to absorb large trades. Weekend price swings demonstrated how lower liquidity levels can lead to increased volatility.
Markets have fully priced in the Federal Reserve’s expected rate cut this week. Data from the CME FedWatch tool shows an 89% probability that the Fed will implement a 25 basis point reduction.
This represents a jump from the 67% probability recorded one month earlier. Polymarket prediction markets indicate traders anticipate the Fed will pause rate cuts in January.
Attention has moved beyond the rate cut itself to Chair Jerome Powell’s commentary on future monetary policy. Gracie Lin from OKX Singapore explained to CoinDesk that conflicting central bank strategies worldwide are generating mixed economic signals.
The Bank of England faces internal disagreement on policy direction. The European Central Bank maintains its current position while the Bank of Japan moves toward tightening at yield levels last observed in 2007.
Daily Market Update: Trump Announces Nvidia China Chip Agreement
US stock futures posted gains Tuesday morning following President Donald Trump’s announcement of a chip sales agreement for Nvidia. The semiconductor company received authorization to restart H200 AI chip shipments to China.
Trump revealed through Truth Social that Nvidia can sell chips to vetted customers in China and similar markets. The deal mandates that 25% of the sales value must be paid to the United States government.
Nvidia’s stock price increased more than 2% in after-hours trading after the news. Trump indicated that Chinese President Xi Jinping gave a positive response to the proposed arrangement.
This agreement offers Nvidia some certainty for its Chinese operations following months of unclear trade policy. Dow Jones Industrial Average futures remained relatively flat while S&P 500 futures increased by 0.1%.
Nasdaq 100 futures traded slightly positive. Major stock indexes had recorded small losses during Monday’s session, ending a recent winning streak.
Daily Market Update: Crypto Market Structure Changes
Recent liquidations of leveraged trading positions have altered market conditions. Lin noted that eliminating crowded trades has allowed prices to move more freely without triggering forced selling.
Bitcoin climbed back toward the $91,000 level as markets adjusted to the new structure. Ethereum posted slight losses but showed relative strength compared to Bitcoin.
The second-largest cryptocurrency reached its highest level versus Bitcoin in over 30 days. Gold prices dropped modestly on Monday as investors remained cautious before the Fed announcement.
Markets are focusing on Powell’s forward guidance regarding future rate decisions. This week brings earnings reports from major companies including Oracle, Broadcom, Costco and Lululemon.
The Fed meeting combined with key corporate earnings will challenge current market positions. Analysts expect market direction will depend more on Fed guidance than the widely anticipated rate reduction.
