Bitcoin (BTC) approached $89,000 during the early hours in Asia, recovering from a 24-hour low of $86,200, which has slightly boosted market sentiment as key tokens exhibit signs of recovery.
XRP and BNB Chain’s BNB spearheaded a gradual rebound among major tokens on Wednesday, as traders continue to recover from the tumult experienced on Tuesday; a day that saw the overall market capitalization plummet by up to 10% and roughly $1.2 billion lost on bullish positions.
XRP gained 3%, with BNB and Solana’s SOL seeing a 5% increase. Meanwhile, Dogecoin (DOGE) and Cardano’s ADA reflected a modest 1.2% rise, while Tron’s TRX dipped by 5% over the past 24 hours. The broader CoinDesk 20 (CD20) index fell by 2%.
This upward movement aligns with a CoinDesk analysis released on Tuesday, which indicated that a drop to a five-month low in a sentiment index and a significant liquidation event suggested that assets were likely oversold, hinting at the possibility of short-term relief.
Gold took a hit on Tuesday, decreasing by 1.3% after profit-taking following a record rally that had pushed prices to new heights on Monday, but it rebounded in the early hours of Wednesday.
Macro Outlook
The factors behind Tuesday’s market panic ranged from substantial withdrawals from bitcoin ETFs, with over $1 billion withdrawn in the last fortnight, to a stronger yen—considered a safe-haven currency whose strength typically suppresses riskier investments.
However, expectations for a more accommodating U.S. Federal monetary policy have surged, with prediction markets estimating a 30% chance of a rate cut in May over the last week, and the odds of two rate cuts by June have more than tripled to 15%.
These optimistic forecasts follow a significant decline in U.S. consumer confidence, which recorded its steepest drop since August 2021, falling by 7 points to 98.3 in February for a third consecutive decrease. U.S. economic data and policies are known to influence the prices of risk assets like bitcoin, as crypto traders anticipate increased retail engagement as liquid cash becomes available.
Traders Remain Cautious
BTC has finally escaped its range, dipping below the $90k mark for the first time in a month and currently resting just beneath that threshold, triggering over $200 million in liquidations in the past few hours.
Market sentiment is under pressure following Trump’s recent decision to impose tariffs on Canada and Mexico and restrict Chinese investments. Front-end gamma was being covered as BTC broke lower, with 1-month implied volatility hovering around 50v, while skews interestingly remain relatively stable.
“Taking a broader view, equities, fixed income, and gold have largely ignored previously blamed data points for widespread market weakness, with BTC remaining stable,” reported QCP Capital, a Singapore-based firm, in a broadcast message late Tuesday. “The increasing dominance of BTC and the decline of altcoin prices suggest that altcoin bulls may already be fully vested, with any new dollar inflows directed exclusively towards BTC.”
“We maintain a cautious stance. Recent BTC demand has primarily been spurred by institutions like MicroStrategy, which have been funding their purchases through equity-linked note issuances. With crypto-related issuances constituting about 19% of total issuances over the past 14 months, the market for such financing may be nearing saturation — potentially reducing institutional demand if spot prices remain muted,” it added.
Entities like Strategy (formerly known as MicroStrategy) have been key drivers of BTC demand in recent weeks and months, funding their acquisitions through stock raises. However, the challenge arises as companies may find it difficult to justify further purchases amid stagnant price growth. A decline in institutional buying could dampen BTC demand, leading to a retreat from major investors and further impacting the market.
