When Markets Go Calm, Risk-Takers Return: Wells Fargo's Take on Crypto Momentum

Investor appetite for riskier assets appears to be strengthening as market volatility continues its downward trend across multiple asset classes. Michael Schumacher, Wells Fargo’s Head of Macro Strategy, recently outlined how subdued volatility metrics are creating conditions for traders and institutions to re-enter riskier positions, including cryptocurrencies.

The Volatility Story: When Fear Disappears

Schumacher drew an interesting parallel during his analysis, comparing market volatility to the price of insurance. When volatility is low, investors feel as though they’re paying less to protect themselves—prompting them to take bigger bets.

The analyst pointed to tangible evidence: the CBOE Volatility Index has declined noticeably, foreign exchange markets are showing reduced swings, and interest rate volatility has compressed significantly over recent months. These shifts signal that risk-off sentiment has been replaced by something more constructive for asset classes traditionally viewed as speculative.

“The market feels relatively safe taking risks again,” Schumacher conveyed, noting that equity markets are presenting “okay” entry points for those willing to embrace volatility. His perspective aligns with broader market behavior—institutions and retail traders alike are repositioning toward assets that were avoided during periods of elevated uncertainty.

Fed Policy: The Backdrop for Market Confidence

Complicating the narrative is the Federal Reserve’s next move. Schumacher signaled that while Wells Fargo expects additional rate cuts ahead, the Fed is unlikely to begin cutting immediately. Market pricing reflects this cautiousness, with only a 5% probability assigned to a near-term rate reduction.

The macro strategist cited mixed labor market signals as a reason for the Fed’s wait-and-see approach. While the U.S. job market created 50,000 positions against forecasts of 60,000, the unemployment rate edged lower to 4.4%. This inconsistency—coupled with expectations for a “messy” Consumer Price Index reading—means the Fed will likely require another month or two of data accumulation before signaling its next move.

Despite this cautious stance, Schumacher indicated the Fed’s preference leans toward eventual cuts. “I think the Fed would like to cut, but not just yet,” he stated plainly.

Crypto Markets Responding to the Signal

Bitcoin has captured much of this returning risk appetite. The leading cryptocurrency rallied over 8% in early January, approaching the $94,000 threshold before consolidating. As of mid-January, Bitcoin trades near $95.36K, maintaining approximately a 4% gain since the year’s start—evidence that optimism remains grounded despite intermittent pullbacks.

Altcoin markets have exhibited even stronger momentum, with non-stablecoin tokens posting 8% gains since January 1st. Large-cap cryptocurrencies including Sui, XRP, and Solana have outpaced Bitcoin’s performance over the same window, suggesting renewed enthusiasm for riskier segments of the digital asset space.

Volume Metrics Confirm Trader Re-entry

Supporting the narrative are volume figures across spot, derivative, and futures markets—all three have increased for the first time since mid-October. Bitcoin futures open positions are particularly notable, reversing a heavy deleveraging cycle that characterized the final quarter of 2025. These technical developments underscore that both retail and professional traders are genuinely re-entering positions.

However, one caveat exists: spot Bitcoin ETF flows tell a different story. Net outflows of $681 million since early January suggest institutions remain selective, allocating capital cautiously despite the broader risk-on sentiment. Grayscale’s December 2025 report attributed much of the ETF outflow activity to tax-loss harvesting behavior, indicating the pullback may be more structural than fear-driven.

The Broader Market Narrative

Stock indices responded favorably to the same dynamics. Following Non-Farm Payroll data, the S&P 500 and Dow Jones Industrial Average both closed at record levels, reinforcing Schumacher’s observation that equity markets are presenting reasonable risk-reward profiles.

This synchronized movement across equities, currencies, and cryptocurrencies points to a singular driver: diminished volatility creating psychological permission for investors to move up the risk spectrum. Whether this represents a sustainable shift or temporary complacency remains an open question—but for now, the conditions Michael Schumacher described appear firmly in place, lifting sentiment toward assets that require conviction to hold.