U.S. stocks rebounded Monday, lifting risk assets broadly, including crypto. But analysts remain cautious, citing persistent macroeconomic uncertainty and growing signs of excess across markets.
The tech-led rally saw the Nasdaq and Russel 2000 indexes jump 1.84% and 2.35%, respectively. Bitcoin, on the other hand, saw a modest uptick of 0.74%, according to CoinGecko data.
Market gains tracked a sharp shift in sentiment following a 258,000 downward revision to May and June jobs data, fueling expectations of a Federal Reserve pivot.
The probability of a 25 basis point rate cut in September has surged to over 90%, up from 63.1% a week earlier, according to the CME’s FedWatch Tool.
“The bounce today looks fairly machine-driven,” Jake Ostrovskis, Wintermute’s OTC trader, told Decrypt. He warns there are “plenty of signs of froth” and “high levels of risk taking” in both the traditional finance and crypto markets.
The main challenge to the market’s rebound is that the U.S.-focused issues behind last week’s selloff remain unresolved.
President Donald Trump’s abrupt dismissal of Bureau of Labor Statistics Commissioner Erika McEntarfer has done little to ease macroeconomic uncertainty.
The move, seen by some as political interference, has added to investor unease amid ongoing tariff tensions and policy unpredictability.
Options contracts for Bitcoin are reflecting that outlook with "put demand" seen in the $105,000 to $110,000 range, Ostrovskis said. He added that investors are positioning for downside protection rather than speculating on a correction.
Regardless, the uptick in uncertainty amid soaring U.S. stocks, high levels of CTA exposure, and the crowded short U.S. dollar trade are all signs that could signal a correction.
Ostrovskis cautioned that "levels of risk taking can often go on for a while," and warned that if the U.S. stock market "rolls over, crypto will follow suit."
