Aniket PujariBitcoin jumped above the $92,000 level on 3 December, data on CoinMarketCap showed, after climbing to $90,000 the previous night. The recovery comes after an extended selloff that wiped close to $1 billion in leveraged bets, but traders remain cautious, amid signs of persisting stress in the crypto markets, Bloomberg reported.
The world’s largest cryptocurrency gained as much as 6.8% to $92,323, while the second largest token Ethereum rallied over 8% to briefly push its price back above $3,000. Across the board, the smaller names such as Cardano, Chainlink and Solana each rose over 10%, the Bloomberg report added.
Why did Bitcoin, cryptos jump?
The positive push came after United States Securities and Exchange Commission (US SEC) Chairman Paul Atkins said they have plans to unveil “innovation exemption” for digital asset companies, and following Vanguard’s announcement that it will allow crypto holding mutual funds (MFs) and exchange-traded funds (ETFs) to be traded on its platform, as per the report.
Jasper De Maere, desk strategist at Wintermute told Bloomberg, “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.”
Brendan Fagan, Macro Strategist, Markets Live told the publication that the “character of crypto’s latest rally points to a market transitioning out of liquidation mode and back toward deliberate risk-taking.” He added that the fundamental picture remains uneven, “but the combination of washed-out positioning and growing institutional scaffolding provides a sturdier foundation than at any point in the last several weeks.”
However, overall sentiments remain cautious
However, market trackers are not jumping for joy. According to CryptoQuant, the Bitcoin funding rate has turned negative in the last few days. This is an important metric in guaging crypto market sentiment, and a low score means bearish bet may yet prevail in the futures market, as per the report.
“Overall sentiment is cautious. 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,” said Chris Kim, CEO of quantitative asset management protocol Axis told the publication.
Notably, since it hit an all-time record high over 126,000 in October, Bitcoin has been on a bear run, down 33%, while Ethereum has slid 36% in the same period. This has largely come amid market fears over an artificial intelligence (AI)-led bubble in technology stocks, and demand for safe haven options.
‘Extreme Fear’ still in crypto markets?
Analysts at Bitfinex have also flagged another sign for concern, the report said. They noted that crypto exchanges have seen balances of stablecoins (tokens linked to real currencies) such as Tether (USDT) and USDC rise, which suggest that traders are parking capital rather than aggressively buying dips.
“This is typical in late-cycle corrections: investors hedge by moving into stablecoins until ETF flows stabilise and macro uncertainty clears. 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,” they stated in a note.
CoinMarketCap’s “Fear and Greed Index” stood at a level indicating “extreme fear” on 2 December despite Bitcoin’s rise to $90,000, having spent the last three weeks around that zone. At time of writing, it was still in the “fear” zone.
(With inputs from Bloomberg)
Key Takeaways
- Bitcoin’s recent surge highlights volatility in the cryptocurrency market, marked by rapid price swings.
- Traders are increasingly moving into stablecoins, reflecting a cautious approach amidst uncertainty.
- Institutional interest is rising, but market participants are awaiting macroeconomic clarity before making significant investments.
