Bitcoin's price rose above $90,000 in the past few hours for the first time in nearly a week, recovering some of the losses incurred during a sell-off that lasted more than a month. This rise came amid a broad rally in riskier assets and a significant decrease in volatility, giving traders room to push prices higher.
Although the rally was modest, it brought higher levels back into focus, with digital assets moving in tandem with stocks amid growing confidence that the Federal Reserve may soon resume interest rate cuts. BlackRock's US Bitcoin ETF also saw new inflows, ending a series of previous outflows. Liquidity levels remain thin ahead of the Thanksgiving holiday, but with volatility subsiding and no signs of renewed forced selling, optimists appear to be testing the waters, suggesting the worst of the downturn may be over.
Adam McCarthy, a research analyst at Caico, said that what is happening is related to the nature of markets during the holiday season, explaining that lower liquidity means that large moves do not need a great impetus.
Gradual improvement despite significant losses
Bitcoin rose as much as 4 percent to $90,460 on Thursday, reducing its losses from a record high above $126,000 in early October to just about 28 percent.
Despite a 36% drop since its all-time high in early October, underlying volatility has remained limited, a shift reflecting the impact of institutional buying on how risk is distributed in the market. In its early stages, Bitcoin's price was primarily driven by speculative trading from those seeking to profit from its extreme volatility.
Jasper de Mar, a strategist at Wintermot, said that Bitcoin's levels near the $80,000 range this week played an important role as a support point that helped the market stabilize, following the series of declines seen in cryptocurrencies in recent weeks.
Improved trader sentiment and derivatives movements
Data from derivatives markets indicates that overall trader sentiment is already improving. Bitcoin perpetual contracts, a key instrument for leveraged speculation, are seeing increased long positions, with open interest remaining moderate, according to Coinglass. Furthermore, the shift in funding rates into positive territory suggests that bullish traders have regained control of the market after a bearish trend earlier this week.
Data from Coinbase’s Debit platform shows that buy options at the $100,000 level are currently attracting the most attention, after bearish options around the $80,000 and $85,000 levels dominated during the past week.
Spencer Hallarn, head of over-the-counter trading at GSR Digital Investment, said that speculative buying positions have declined significantly in recent weeks, as evidenced by lower open contract volumes and reduced funding rates, putting the market in a position to potentially launch a new upward move if the appropriate momentum is present.
Previous decline and liquidation wave
Cryptocurrency prices suffered a major shock in early October when Donald Trump's announcement of his intention to raise tariffs triggered widespread turmoil in global markets. This wiped out more than $1 trillion in the market capitalization of digital assets, in addition to a wave of forced sell-offs affecting a large number of traders.
Despite these massive losses, investors appear to be retesting the market. Bitcoin exchange-traded funds (ETFs) saw inflows of nearly $130 million on Tuesday, according to Bloomberg Intelligence data. Meanwhile, investors withdrew almost $3.6 billion from U.S.-listed ETFs in November, the largest monthly outflow since the products' launch, and the first real test of their resilience to market volatility.
