Market Recap – 5 December 2025: Dollar Steadies, Risk Appetite Fades, Crypto Struggles

The 5 December session was all about waiting for the U.S. Core PCE report and adjusting risk around it.

The dollar held near key support, equities and large-cap crypto stalled, and the pain in mid- and micro-cap tokens deepened, with many names still down close to 70% year-to-date. The long-delayed November Nonfarm Payrolls report, now pushed to 16 December, adds another layer of uncertainty to the Fed-policy puzzle.

TL;DR – What Moved Markets Today

• Dollar steadies: USD hovered near key support as traders prefer to wait for Core PCE.
  
  • Stronger-than-expected → potential dollar bounce and challenge to aggressive rate-cut bets.
  • Softer print → reinforces bearish bias on USD.
• Risk appetite fades:
  
  • Global equities and crypto lost momentum, shifting from optimism to caution.
  • The delayed November NFP (Dec 16) keeps everyone guessing about the Fed’s next moves.
• Crypto struggles:
  
  • Mid- and micro-cap tokens remain in deep drawdown (≈–70% YTD).
  • Early-week “bargain hunting” has faded; the sector is still fragile and highly sensitive to risk-off flows and regulatory/policy headlines.

1. Dollar Steadies Above Support – All Eyes on Core PCE

The U.S. dollar index spent the day hovering just above key support levels, refusing to break lower but unable to mount a convincing rally.

Traders basically said:

“No Core PCE, no big dollar bet.”

Why Core PCE Matters

• It’s the Fed’s preferred inflation gauge.
• A hotter-than-expected print could:
  
  • Support a higher-for-longer narrative,
  • Push yields and USD higher,
  • And force markets to question aggressive rate-cut pricing.
• A softer print would:
  
  • Strengthen the case for earlier / deeper cuts,
  • Likely weigh on the dollar,
  • And give some support back to risk assets (equities, gold, crypto).

Price Action Today

• Intraday, USD:
  
  • Traded in a narrow range around support,
  • Showed small bounces on dips but no follow-through,
  • Looked like classic pre-data positioning, not a genuine trend move.

In other words, nobody wants to be wrong in size right before a potentially market-moving inflation print.

2. Risk Appetite Fades – Equities and Crypto Take a Breather

Across global equities and major crypto (BTC, ETH), the theme was the same:

momentum cooled, and traders shifted from “let’s ride the rally” to “let’s reduce risk and wait.”

What Changed?

• The mood turned from:
  
  • “Fed cuts soon, risk-on!”
    to
  • “Let’s see Core PCE first… and oh, NFP got delayed too?”
• The postponement of November Nonfarm Payrolls to 16 December:
  
  • Extends the uncertainty window,
  • Keeps Fed expectations more fragile,
  • And makes investors wary of over-committing before they see both inflation and labour data.

How It Showed Up in Price

• Equities:
  
  • Indices gave back part of recent gains or chopped sideways.
  • High-beta and growth names underperformed as traders trimmed exposure.
• Top crypto (BTC, ETH):
  
  • Held above recent lows but lost upside momentum.
  • Intraday bounces got sold quicker than earlier in the week.

Net result: no big crash, but a clear step down in risk appetite.

3. Crypto Struggles – Mid & Micro Caps Still in Deep Pain

The ugliest performance remains in the mid- and micro-cap crypto space.

State of the Smaller Caps

• Many of these tokens are:
  
  • Down around 70% year-to-date,
  • Trade with very thin liquidity,
  • And are highly exposed to policy and regulatory uncertainty.
• Early in the week there was some “bargain hunting”:
  
  • Traders tried to catch oversold names at extreme discounts.
  • That buying interest has largely faded as macro caution increased.

Why They’re So Vulnerable

1. Weak sentiment:
   
   • After multiple failed narratives and brutal drawdowns, confidence in small caps is low.
3. Policy uncertainty:
   
   • Ongoing debates about crypto regulation, token classification, and DeFi rules keep institutions away from the deeper end of the market.
5. Risk-off flows:
   
   • When global risk appetite fades, investors:
     
     • First cut mid- and micro-cap crypto,
     • Then reduce altcoins,
     • And only later trim BTC/ETH if the stress worsens.

Price Behaviour Today

• Many mid/micro caps:
  
  • Printed new or retested YTD lows,
  • Reacted weakly to bounces in BTC,
  • And showed very low volume, meaning moves can be exaggerated both ways.

Short version: the sector is alive but fragile – and remains the first victim when macro goes risk-off.

4. Short-Term Scenarios for the Coming Sessions

These are scenarios, not trading signals – use them as a mental map.

Scenario A – Data in Line, Slow Grind (Most Neutral)

• Core PCE comes out close to expectations.
• Dollar stays near current support, with only a mild reaction.
• Equities and large-cap crypto stabilise, maybe recovering slowly.
• Mid/micro caps remain choppy with occasional short squeezes, but no clear trend.

This is the “nothing solved, nothing broken” path.

Scenario B – Hot PCE, Stronger Dollar, Deeper Risk-Off

• Core PCE beats to the upside.
• Market pushes out the timing/size of Fed cuts.
• USD bounces off support, yields rise.
• Equities correct further, high-beta names sell off.
• Crypto:
  
  • BTC/ETH trade heavy,
  • Mid/micro caps see another leg down as risk-off intensifies.

This is the scenario where “cash and short-duration” outperform for a while.

Scenario C – Soft PCE, USD Breaks Support, Risk-On Attempt

• Core PCE prints softer than expected.
• Rate-cut expectations get re-energised.
• Dollar breaks or tests below support, yields dip.
• Equities try to rebuild a year-end rally, led by growth/tech.
• Crypto:
  
  • BTC/ETH get a sentiment boost,
  • Mid/micro caps see speculative inflows, but only the strongest narratives really benefit.

This is where the “Santa rally” crowd comes back with more conviction.

5. Practical Takeaways for Traders

1. Core PCE is the main event
   
   • Don’t over-read today’s small moves; the real information shock is still ahead.
3. Dollar at support = asymmetric risk
   
   • A surprise in PCE can easily produce a sharp, fast move off these levels.
5. Equity & crypto bulls need confirmation, not hope
   
   • The market is at a point where hopium isn’t enough – bulls need data to support the case for cuts.
7. Mid/micro caps = high risk, low liquidity
   
   • Great for tiny, speculative sizing, terrible for oversized positions – especially in macro event weeks.

6. Risk Management Checklist (Next 24–72 Hours)

Before you add or increase positions, ask yourself:

• Do I know the exact publication time of Core PCE in my local timezone?
• Am I comfortable holding leveraged positions through the print, or do I prefer to flatten and re-enter?
• How much of my portfolio is in illiquid mid/micro-cap tokens that I can’t exit quickly?
• If the dollar makes a large move in either direction, what happens to my FX / crypto / equity exposure?
• Do I have a plan written down for:
  
  • What to do if PCE is hot,
  • What to do if it is soft,
  • And what to do if it’s in line and the market fakes out both sides?

FAQ – 5 December 2025 Session

Why is the dollar not collapsing if rate cuts are expected?

Because markets are already pricing a lot of easing, and traders are waiting to see if Core PCE actually validates that view. Until then, the dollar tends to hold at key technical levels.

Does fading risk appetite mean the bull market is over?

Not automatically. It often means markets are in a “prove it” phase, where bulls need data support. It’s a pause, not a clear trend reversal (yet).

Why are mid- and micro-cap tokens down so much vs BTC/ETH?

They are:

• Riskier,
• Less liquid,
• More exposed to regulation and narratives,
  so they get hit harder in risk-off periods and recover later (if at all).

Is now a good time to “bargain hunt” small caps?

It can be tempting, but remember:

• Down 70% can become down 85%.
• Liquidity is poor, spreads are wide.
  If you do it, treat it as high-risk, small-size speculation, not core investing.