Markets rarely hand traders a clean slate—but that’s exactly what many see after the largest crypto deleveraging in five years reset positioning in October. Now, veteran strategist Tom Lee is calling for a bullish year-end push into 2025 for Bitcoin and Ethereum, citing the tailwind of Fed rate cuts, reduced open interest, and rising stablecoin-driven activity on Ethereum’s L1/L2. If liquidity and positioning continue to normalize, the next leg could be built on healthier footing than the summer rally.

What’s Changing Under the Hood

The October washout flushed excessive leverage, with Bitcoin behaving like a store of value throughout the liquidation and Ethereum activity picking up via stablecoin settlement across L1 and L2. Layer on a shift toward easier monetary policy and a softer rate environment, and you have a backdrop where risk premia compress and quality crypto assets re-rate.

Why This Matters to Traders

Lower real yields typically support risk assets, while reduced open interest means fewer forced liquidations and cleaner trend formation. For ETH specifically, rising stablecoin flows are a practical demand driver for blockspace and fee markets, often preceding better spot and ETH/BTC performance. Seasonality and year-end positioning can add fuel if data cooperates.

Signals to Track Before You Risk Capital

• Rates & USD: Fed funds futures path, US real yields, and DXY. A softer dollar and declining real yields bolster the bull case.
• Positioning: BTC/ETH open interest, perp funding rates, and basis. Favor fresh longs when funding is flat/negative and OI rebuilds steadily.
• Volatility: Realized vs. implied vol and options skew. Rising call skew into year-end often confirms risk-on appetite.
• On-chain demand (ETH): Net stablecoin issuance, L2 activity, and gas spikes tied to settlement rather than speculation.
• Macro catalysts: CPI, jobs data, and FOMC. Positive surprises can extend the rally; hot prints can re-tighten financial conditions.

Actionable Ways to Position (Risk-Defined)

• BTC trend approach: Buy pullbacks into prior liquidation zones with tight invalidation. Add when funding resets negative and OI rebuild is measured, not manic.
• ETH relative value: Consider partial exposure via ETH/BTC if stablecoin throughput and L2 activity outpace BTC’s dominance.
• Options for asymmetry: Use defined-risk call spreads into year-end (e.g., staggered December–January expiries) to express upside without leverage blowups.
• Staging and sizing: Scale entries in thirds, cap position size, and pre-define exits at invalidation levels rather than “feel.”

Key Risks to Respect

A re-acceleration in inflation, a stronger USD, or a hawkish Fed turn could stall risk appetite. Another rapid OI build can recreate fragility and trigger a second deleveraging. Regulatory headlines remain a wild card—treat gaps and event risk with hedges or reduced size.

The Bottom Line

The thesis is straightforward: if Fed cuts continue, open interest rebuilds responsibly, and ETH’s stablecoin activity sustains, the path of least resistance is higher into 2025. Trade it with discipline: monitor rates, positioning, and on-chain demand; favor staged entries and risk-defined structures; cut fast if macro signals flip.

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