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Bitcoin is beginning to show signs of recovery after dipping near $82,000 on Friday, with several market analysts suggesting that selling pressure is fading and conditions may be shifting toward a potential bottom. The move comes as expectations for a Federal Reserve rate cut rise sharply, improving sentiment across risk assets, including cryptocurrencies.
Market Sentiment Improves as Bitcoin Rebounds From Local Lows
Bitcoin briefly fell to around $80,600 on Coinbase on Friday, marking its lowest level since mid-April and extending the decline from its early October all-time high above $126,000 to nearly 36%. However, the digital asset has since begun climbing, trading back above $86,000 as of Monday.
Charles Edwards, founder of Capriole Fund, said the steep pullback over the past two weeks was largely driven by shifting expectations around U.S. monetary policy. He noted that tech stocks and crypto markets sold off as traders reassessed the likelihood of a near-term rate cut.
“Markets dumped because of the flip-flopping on expectations for a rate cut,” Edwards said on X. “As the market reverts, expect it will carry Bitcoin somewhat higher.”
Analysts Highlight Signs of a Potential Bottom Formation
Analysts at Swissblock also pointed to improving market structure, noting that Bitcoin has taken “its first real step toward forming a bottom.” According to the firm, its internal “Risk-Off Signal” has dropped sharply, indicating reduced selling pressure and suggesting that the worst of the recent capitulation may have passed.
“The Risk-Off Signal tells us two things: selling pressure has eased, and the worst of the capitulation is likely behind us, for now,” Swissblock analysts wrote.
However, they also warned that bottom formation is rarely a single event. Typically, markets see a second wave of selling — weaker than the first — which retests previous lows. This second dip often marks seller exhaustion and helps confirm a market bottom.
“That second wave usually signals exhaustion and a shift in control back toward the bulls,” the analysts added.
Depth of the Pullback Highlights Market Stress
The recent correction follows an aggressive sell-off that saw Bitcoin lose more than a third of its value in just a few weeks. TradingView data shows that the decline from the October high to Friday’s low reached roughly 36%, one of the steepest drops of the year.
Despite the severity of the pullback, analysts argue that the speed and depth of the move could help accelerate bottom formation. Historically, sharp corrections paired with improving liquidity expectations have preceded strong recoveries in Bitcoin.
Rising Odds of a Fed Rate Cut Boost Market Confidence
One of the most influential drivers of Bitcoin’s rebound is the rapid shift in expectations for U.S. monetary policy. Last week, the probability of a Federal Reserve rate cut in December fell to around 30%. But within days, the likelihood surged back to roughly 70%, dramatically improving sentiment across financial markets.
The CME FedWatch Tool — which tracks probabilities for changes to the federal funds rate — currently shows 69.3% odds of a 0.25% rate cut at the Federal Reserve’s December 10 meeting.
“What a difference two days make in market expectations,” posted Global Markets Investor, highlighting how quickly predictions flipped on Polymarket.
Historically, Bitcoin has reacted positively to rising odds of monetary easing, as lower interest rates and increased liquidity typically support risk-on assets.
Analysts Say Liquidity Expansion May Be Imminent
Market analyst Sykodelic suggested over the weekend that the Federal Reserve may go beyond a simple rate cut and announce some form of liquidity expansion or “reserves management” at its upcoming meeting.
“I really would not be surprised to see the Fed announce something in the way of reserves management — essentially, liquidity expansion,” they wrote.
They added that liquidity injections are not optional for the central bank: “The central bank has to inject liquidity at some point, otherwise they go bankrupt.”
Higher liquidity tends to boost demand for risk assets, including Bitcoin. Past periods of quantitative easing have often been followed by significant rallies across crypto markets.
What Comes Next for Bitcoin?
While analysts are cautiously optimistic, they also warn that volatility is likely to remain elevated in the short term. Swissblock’s outlook suggests that a final retest — the “second selling wave” — remains possible before a durable bottom forms.
Still, the broader shift in macro conditions, including rising odds of a rate cut and expectations of improved liquidity, has introduced a more constructive narrative for Bitcoin heading into December.
If selling pressure continues to diminish and Bitcoin holds above recent lows, analysts believe the market could be setting the foundation for a stronger recovery heading into early 2026.
