As inflation slows and the resumption of US-China dialogue boosts market sentiment, the market is returning to risk assets. A clearer positioning layout paves the way for a positive market in November.
Author: @Jjay_dm, Wintermute OTC Trading Strategist
Translation: Deep Tide TechFlow
Market Dynamics Update – October 27, 2025
With the US CPI data softening and news of improved relations between Trump and Xi Jinping boosting market sentiment, risk appetite is returning. Bond yields are declining, and market volatility is decreasing. Bitcoin has returned to the $115,000 mark due to ETF inflows and short covering, while the decentralized finance (DeFi) and artificial intelligence (AI) sectors lead the recovery. Market positions have been cleared, and liquidity has improved, laying a positive foundation for sustained momentum in November.
Macroeconomic Dynamics
The market has rebounded strongly under the influence of dovish macro signals and the resumption of US-China dialogue. The news of a summit between Trump and Xi Jinping in Seoul, combined with US CPI data coming in below expectations (year-on-year growth of 3.0%, expected 3.1%), triggered a broad asset rebound. The S&P 500 index rose by 1.9%, the volatility index (VIX) fell to around 16, and Treasury yields declined, while expectations for interest rate cuts ahead of this week's Federal Reserve (FOMC) meeting have strengthened.
Bitcoin performed strongly, rising 5.3% in a single day to over $115,000, recovering some of the positions lost due to liquidations at the beginning of October. This surge was driven by $160 million in short liquidations, which were triggered by improved market sentiment following the confirmation of the US trade framework, marking one of the most intense short squeezes in weeks. Ethereum's price also rose, approaching $4,200, while gold prices fell nearly 7% from their highs, indicating a shift of funds from defensive assets to risk assets.
There are early signs of an expansion in market capital flows, surpassing mainstream asset categories:
DeFi and AI sectors: Benefiting from strong protocol revenue data and improved on-chain activity, leading the market.
Infrastructure and tool assets: Attracting more liquidity with the deployment of new second-layer (L2) networks and the introduction of restaking mechanisms.
In the perpetual contract market, the funding rates for most major assets have turned positive again, indicating that sidelined capital is gradually flowing back into the market, although current positioning is still far from overcrowded. The supply of stablecoins has seen its first increase since September, further indicating that macro positives are beginning to translate into new capital inflows.
ETF inflows continue to provide a stable demand base for the market. Despite a decrease in trading volume, the US spot Bitcoin ETF absorbed a moderate amount of capital inflow this week, demonstrating the resilience of structural demand. The open interest in Bitcoin and Ethereum perpetual contracts has been steadily rebuilt after the liquidations at the beginning of the month, indicating a healthier leverage situation in the derivatives market and a more balanced funding rate.
Although the "Uptober" market started slightly below expectations, the macro positives, cooling inflation, "stable" geopolitical situation, and the Federal Reserve's dovish stance are creating a favorable environment for the remainder of the year. Historical data shows that the fourth quarter is typically the strongest period for Bitcoin. The current positions are more cleared, volatility has decreased, paving the way for capital rotation into crypto assets, which is the current market trend.
The macro positives, cooling inflation, improved global diplomatic relations, and expectations of a Federal Reserve pivot lay the groundwork for further gains in November, which has historically been the strongest month for Bitcoin. With position cleansing, reduced volatility, and capital gradually flowing into the crypto market, improved liquidity conditions and stabilized market sentiment provide positive support for sustained recovery in the fourth quarter.
Our View
As inflation slows and US-China dialogue resumes, boosting market sentiment, the market is returning to risk assets. A clearer positioning layout paves the way for a positive market in November.
Support from macro data is driving the market back into risk mode. Slowing inflation and improved US-China relations have alleviated yield pressures and reduced market volatility, helping risk assets to stabilize.
Bitcoin has recovered its early October losses through stable ETF inflows and continues to serve as a core pillar of market structure, while sectors like decentralized finance (DeFi) and artificial intelligence (AI) lead the market rebound. Although altcoins are still in a rotation trading state with some strong performances, overall market confidence remains insufficient. With clearer positions, calmer volatility, and a better macro environment, the market outlook for November is healthy, providing favorable conditions for further recovery and rotation in the crypto market.
Notable Headlines
JPMorgan (@jpmorgan) has now allowed institutional clients to use Bitcoin (BTC) and Ethereum (ETH) as collateral, marking an important step towards broader integration of cryptocurrencies.
The Federal Reserve is exploring "payment accounts," which could provide direct access to the Federal Reserve's payment system for cryptocurrency and fintech companies.
Coinbase (@coinbase) has expanded its retail product lineup by acquiring @echodotxyz for $375 million, a platform that simplifies on-chain portfolio management.
Polychain Capital (@polychain) led a $110 million investment in @berachain to build a crypto treasury supporting on-chain liquidity and governance.
Meteora AG (@MeteoraAG) has completed its token generation event (TGE) and launched Presale Vaults, Meteora Invent, and Dynamic Fee Sharing to enhance capital efficiency.
MegaETH Labs (@megaeth_labs) has launched a public sale on the Sonar/Echo platform, with an initial fully diluted valuation (FDV) of $1 million.
Since its launch in May, discussions around the x402 Protocol have been gaining momentum, driving market sentiment for blockchain-based artificial intelligence agents (AI Agents).
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