Bitcoin has bounced back above the $70,000 mark, recovering from a significant dip that brought the cryptocurrency close to $60,000 earlier this month. As of the latest update, Bitcoin’s price stands at approximately $69,800.77, reflecting a nearly 5% increase over the last 24 hours. This surge comes alongside a broader upward movement in the cryptocurrency market, with the CoinDesk 20 (CD20) index gaining 6.2% during the same timeframe.
The recent uptick in cryptocurrency prices is largely attributed to a cooling U.S. inflation report, which indicated a year-over-year rise in the Consumer Price Index for January of 2.4%, slightly below the anticipated 2.5%. Such data has fueled investor optimism, indicating that interest rate cuts might be more imminent than previously thought, thereby enticing investments into riskier assets like cryptocurrencies and stocks.
Current market sentiments suggest a growing expectation of a 25 basis point rate cut in April, with traders on platforms like Kalshi upping the odds from 19% to 26% this week. Similarly, Polymarket has seen a rise in probabilities from 13% to 20%.
Despite the favorable conditions driving the rally, significant underlying market anxieties persist. The Crypto Fear & Greed Index, a popular sentiment gauge, continues to indicate “extreme fear,” reminiscent of the panic that marked the 2022 bear market, particularly surrounding the fallout from the FTX collapse. It has been operating in the extreme fear zone since the start of the month.
This prevailing anxiety is underscored by analysts from Bitwise, who reported that approximately $8.7 billion in Bitcoin losses were realized in the past week, a figure only eclipsed by the economic repercussions of the Three Arrows Capital (3AC) incident. Furthermore, data shows that Bitcoin treasury firms are currently facing over $21 billion in unrealized losses, marking an all-time high; however, Bitcoin’s recent price resurgence has reduced that figure to around $16.9 billion.
The current rally has been supported by thinner trading volumes and a sense of seller exhaustion. Analysts describe the $8.7 billion in realized losses as a potential “textbook capitulation event.”
However, the overarching mood of fear continues to inhibit a more robust recovery. As Bitwise research analyst Danny Nelson noted, the market’s prevailing sentiment is driven by fear of declining prices, leading investors to capitalize on any upward movement as an opportunity to sell. Whether this trend will persist or if a shift towards stronger conviction among holders will ultimately change the market dynamics remains uncertain.
