Bitcoin rose on Tuesday, recovering from recent losses as confidence grew that the U.S. Federal Reserve would cut interest rates in December, helping to support high-risk assets.
But Bitcoin's gains appeared to be losing momentum, as investors remained highly cautious about cryptocurrencies after significant price losses during October and early November.
Alternative currencies posted stronger gains on Tuesday, but they have also suffered sharp losses over the past month.
Bitcoin rose 0.8% to $88,187.90 by 8:43 AM Saudi time.
Bitcoin receives support from bets on an interest rate cut in December.
Bitcoin's recovery from a seven-month low was primarily driven by renewed bets on a December interest rate cut by the Federal Reserve. This came after at least two Fed officials spoke in support of a rate cut next month.
Markets are pricing in a 77.2% probability that the Federal Reserve will cut interest rates by 25 basis points at its December 9-10 meeting, a sharp rise from the 41.8% probability projected last week, according to CME Fedwatch.
The shift in market expectations has led to gains across risk-driven markets, with cryptocurrencies also included in the recovery rally.
However, overall gains in cryptocurrencies have lagged behind the recovery seen in stocks, particularly in the technology sector. While cryptocurrencies tend to move in tandem with technology stocks, they have gradually diverged from the sector since at least early October.
Bitcoin and broader cryptocurrency prices have been in a prolonged decline since October, influenced by a range of factors. Retail traders have become more cautious about the sector following a sharp drop in early October, while institutional flows into cryptocurrencies have dried up significantly, with US-listed Bitcoin ETFs recording five consecutive weeks of capital outflows.
Attention is now focused on a series of upcoming US economic readings to provide further clues ahead of the Federal Reserve meeting in December. Producer price inflation and retail sales data for September are due later on Tuesday, while the personal consumption expenditures price index, the Fed's preferred inflation gauge, is due on Thursday.
Cryptocurrency prices today: Altcoins see stronger recovery
The broader cryptocurrency market outperformed Bitcoin slightly on Tuesday, as the battered sector attracted attractive buying at enticing prices.
The world’s number 2 cryptocurrency, Ethereum, rose 3.2% to $2,928.08, while XRP jumped 8.7% to $2.2523.
Solana, Cardano and BNB rose between 1% and 5%.
Among the meme coins, Dogecoin rose by 3.1%, while $TRUMP fell by 0.5%.
