The crypto markets staged a convincing comeback on Nov. 27, snapping a prolonged period of stagnation as a critical shift in the United States’ liquidity forced capital back into risk assets.
While the headline price action saw Bitcoin surge 5% to reclaim the psychologically vital $90,000 threshold and Ethereum clear $3,000 for the first time in a week, the true story lies in the fact that the rally provides much-needed relief to a market that had been grinding lower for a month
Indeed, the extent of the recent capitulation is evident in trailing returns. Data from Santiment shows that, leading into this week, losses among average wallet investments in the major digital assets were deeply underwater.
According to the firm, Cardano’s investors had shed an average of 19.2% of their value, Chainlink traders were down 13.0%, and even the market leaders were underwater, with ETH and Bitcoin nursing losses of 6.3% and 6.1%, respectively. XRP fared slightly better but was still down 4.7%.
So, the current 3.7% lift in total crypto market capitalization appears less driven by sector-specific news and more by a structural reopening of the fiscal spigot, combined with a sudden thawing in risk appetite among institutional allocators.
Why the crypto market rallied
To understand the mechanics of this rally, one must look past the order books and at the US Treasury’s balance sheet.
In an X post, asset management firm Ark Invest explained that the primary catalyst for the reversal was the normalization of liquidity following the resumption of US government operations.
The six-week government shutdown, which concluded recently, acted as a massive drain on the financial system, effectively siphoning approximately $621 billion in liquidity. This contraction left markets parched, hitting a multi-year low in liquidity on Oct. 30.
However, the reopening of federal operations has begun to reverse this dynamic. While roughly $70 billion has trickled back into the system so far, the “tank” is still overly full; the Treasury General Account (TGA) currently holds elevated balances near $892 billion.
Against a historical baseline of $600 billion, this deviation suggests a massive cash deployment is imminent.
So, as the Treasury normalizes this account over the coming weeks, that excess capital is mathematically mandated to flow back into the banking sector and the broader economy.
For macro-aware crypto traders, this represents a predictable wave of liquidity that historically buoys risk assets first.
Meanwhile, the fiscal tailwind arrives alongside a pivot in monetary messaging.
Ark noted that the “higher for longer” narrative that capped upside earlier in the quarter effectively dissolved this week as a chorus of Federal Reserve officials, including Governor Christopher Waller, New York Fed President John Williams, and San Francisco’s Mary Daly, telegraphed a willingness to cut rates.
This coordinated dovishness has repriced the probability of a near-term rate reduction to nearly 90%.
Considering this, the firm highlighted a critical calendar convergence: the TGA cash injection is set to align with the scheduled conclusion of Quantitative Tightening (QT) on December 1. The firm noted that the removal of the Fed’s balance sheet runoff removes a persistent dampener on liquidity, creating a setup where beta assets face fewer headwinds.
Institutional interest returns
Apart from the strong liquidity plumbing, institutional flows have painted a nuanced picture of where allocators are positioning for the year-end.
Spot ETFs saw a distinct rotation toward Ethereum. For the fourth consecutive session, ETH products attracted net inflows, totaling approximately $61 million, according to SoSo Value data.
Meanwhile, Bitcoin funds saw more modest inflows of around $21 million, while XRP investment vehicles added roughly $22 million. Conversely, Solana products faced headwinds, seeing $8 million in redemptions.
This flow profile suggests the current bounce is a “repair” operation rather than a speculative frenzy.
Timothy Misir of BRN told CryptoSlate that while buyers have re-engaged, volumes remain relatively thin. At the same time, he pointed out that open interest has not spiked significantly, despite perpetual futures funding rates having reset to positive territory.
This lack of froth is constructive, as it implies that weak hands have washed out and that accumulation is occurring without the dangerous leverage that often precedes a crash.
Risks ahead
For crypto traders, the immediate focus is whether this liquidity-fueled bounce can turn into a sustained trend, as significant risks loom ahead.
Misir pointed out that the “swing factor” remains the macro environment, as a hot inflation print could force the Fed to walk back its dovish signaling, instantly tightening conditions.
Furthermore, the upcoming holiday season often leads to thinning order books, where lower liquidity can exacerbate volatility. At the same time, a sudden spike in exchange deposits would signal 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 top asset could eye the $95,000 zone as the next major test.
However, a failure here would likely see a retreat to the $84,000 pivot area.
