Bitcoin BTC$70,399.30 It has rebounded from a plunge of nearly $60,000 at the beginning of the month to more than $70,000.
The cryptocurrency has gained nearly 5% in the past 24 hours, while the broader CoinDesk 20 (CD20) index has risen 6.2% over the same period.
The rebound came as investors reacted to slower-than-expected U.S. inflation trends and signs of new risk appetite. The consumer price index rose 2.4% in January compared to the same month last year, slightly lower than the expected 2.5%.
This gave the market reason to believe that the interest rate cut could come sooner than expected, allowing both stocks and cryptocurrencies to rise. Lower interest rates reduce the rate of return on risk-free or low-risk investments, making risky assets more attractive.
Traders on prediction market Kalshi now put the probability of a 25 basis points cut in April at 26%, up from 19% earlier in the week. In Polymarket, the odds increased from 13% to 20%.
Still, this rise hides deeper cracks beneath the surface.
The Crypto Fear & Greed Index continues to reflect deep anxiety, hovering near extreme fear levels last seen during the 2022 bear market surrounding the collapse of FTX. The index has been in “extreme fear” since the beginning of the month.
Analysts at Bitwise noted that Bitcoin losses of $8.7 billion occurred in the last week, second only to the impact of the 3AC collapse.
“Nevertheless, while the rotation of supply from weak investors to high-conviction investors has historically been associated with market stabilization phases, such redistribution takes time to fully unfold,” Bitwise wrote.
Bitcoin treasury companies had unrealized losses of more than $21 billion, a record high. With Bitcoin’s recovery, this number has dropped to $16.9 billion.
Lower weekend trading volumes and drying up of sellers are supporting the current rally. Last week’s $8.7 billion in realized losses could be described as a “textbook capitulation event.”
But the extreme fear gripping the market poses challenges. AS Bitwise research analyst Danny Nelson told CoinDesk that the market’s “main driver right now is fear. Fear of going down.”
That concern has investors viewing the upcoming bull market as a selling opportunity. It remains to be seen whether that will continue to happen, or if a shift to higher conviction holders will change the direction of the market.
