Bitcoin surged back above $90,000 on Tuesday, recovering from a bruising selloff that caught Wall Street off guard and erased nearly $1 billion in fresh leveraged bets. The rebound offered a brief respite in a months-long rout, but traders remain cautious, with sentiment still fragile and signs of stress persisting across crypto markets.
The original cryptocurrency rallied as much as 6.8% to $92,323, while its next biggest rival - Ether - rebounded by more than 8% to briefly push its price back above $3,000. Smaller, less liquid tokens such as Cardano, Solana and Chainlink jumped more than 10%.
Traders cited an abundance of positive signs after weeks of waning investor demand, including comments by Securities and Exchange Commission Chairman Paul Atkins on plans to unveil the measures behind an “innovation exemption” for digital asset companies and Vanguard Group’s decision announced Monday that it will allow ETFs and mutual funds that primarily hold cryptocurrencies to be traded on its platform.
“It seems to be a combination of industry specific headlines and crypto catching up to the broader market that is driving this strong price activity,” said Jasper De Maere, desk strategist at Wintermute.
Token prices had initially tumbled Monday following comments over the weekend by Strategy Inc.’s chief executive that the Bitcoin accumulator could resort to selling the cryptocurrency if needed to make debt payments. Strategy, formerly known as MicroStrategy, said later that morning that it was establishing a $1.4 billion reserve to have cash readily available.
“While at first blush participants took this as an extremely negative development, the fact that they are conservatively addressing their liquidity situation now decreases the probability of an extreme left-tail outcome down the road,” said Spencer Hallarn, global head of OTC trading at crypto investment firm GSR.
Even so, several metrics point to a potentially uneven recovery, market watchers said. The Bitcoin funding rate — a key measure of crypto market sentiment — has turned negative in the last few days, according to CryptoQuant, meaning there is more demand for bearish bets in the perpetual futures market than for bullish positions.
“Overall sentiment is cautious,” said Chris Kim, chief executive of quantitative asset management protocol Axis. “Crypto-native traders are nervous.” Institutional investors, meanwhile, appear to be waiting for the Federal Reserve’s interest rate decision next week before adding risk, he said.
Bitcoin has fallen almost 30% since hitting a record in early October, leaving the digital asset market on fragile footing after a weeks-long selloff. The downturn accelerated when roughly $19 billion in leveraged bets were wiped out.
Virtual currencies associated with US President Donald Trump’s family have been caught up in the selloff. Shares of American Bitcoin Corp., the crypto miner co-founded by Eric Trump, wiped out more than half of their value in less than 30 minutes on Tuesday, even as trading in the stock was halted multiple times due to intense volatility. The stock fell as much as 51%.
TRUMP, his official memecoin, collapsed from a record high of around $73.40 right after its launch in January. It’s now trading at around $6, according to CoinGecko. WLFI, the token of Trump-linked decentralized finance platform World Liberty Financial, is down roughly 30% from September’s high. MELANIA, the memecoin of First Lady Melania Trump, is trading at 13 cents, having lost nearly all its value since January’s peak.
‘Extreme Fear’
In another sign of investor wariness, crypto exchanges have seen balances of stablecoins such as USDT and USDC rise, suggesting traders are parking capital rather than aggressively buying dips, according to analysts at Bitfinex.
“This is typical in late-cycle corrections: investors hedge by moving into stablecoins until ETF flows stabilize and macro uncertainty clears,” the analysts said in a note. “Importantly, this is not the behaviour seen at long-term tops, where stablecoin liquidity drains; here, liquidity is building up on the sidelines, indicating dry powder waiting for clarity.”
Underscoring the investor wariness, CoinMarketCap’s “Fear and Greed Index” stood at a level indicating “extreme fear” on Tuesday, having spent the last three weeks around that zone.
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