Bitcoin Market Update

Bitcoin (BTC) neared $89,000 in Asian morning hours after a 24-hour low of $86,200, slightly improving market sentiment with major tokens showing signs of a recovery.

Major Tokens Performance

XRP and BNB Chain’s BNB led a gradual majors rebound Wednesday as traders continued to recover from Tuesday’s market carnage — which saw overall capitalization drop by 10% and resulted in at least $1.2 billion in losses on bullish bets.

• XRP rose 3%
• BNB and Solana’s SOL added 5%
• Dogecoin (DOGE) and Cardano’s ADA showed a slight 1.2% gain
• Tron’s TRX was down 5% in the past 24 hours

The broad-based CoinDesk 20 (CD20) decreased by 2%.

The move higher coincided with CoinDesk’s analysis, indicating that after a five-month low in a sentiment index and a significant liquidation event, assets were likely oversold and could see short-term relief.

Gold Market Trends

Gold fell 1.3% on Tuesday after a profit-taking bout following a record rally, where it reached a new high on Monday but has since risen in Asian morning hours on Wednesday.

Macro Outlook

Reasons for Tuesday’s panic included:
– $1 billion pulled out from bitcoin ETFs in the last two weeks.
– A stronger yen, a perceived safe-haven currency, which adversely affects riskier bets.

However, expectations for easier U.S. Federal Monetary policy have surged, with prediction markets placing the chances of a May rate cut at 30% and the chances of two rate cuts by June more than tripling to 15%.

These expectations come after a gauge of U.S. consumer confidence saw its deepest fall since August 2021, decreasing by 7 points in February to 98.3, marking its third straight decline. U.S. economic data and policies significantly impact risk assets like bitcoin, as crypto traders anticipate retail participation when idle cash becomes available.

Traders Remain Cautious

Despite hopes for an altcoin rally, traders remain cautious, with fresh dollar inflows expected to go exclusively to BTC. BTC finally broke out of its range, dipping below 90k for the first time in a month and hovering just below that level, triggering over $200 million in liquidations.

Market sentiment remains under pressure, following Trump’s tariffs on Canada and Mexico and restrictions on Chinese investments. Front-end gamma was covering as BTC broke lower, with 1M implied volatility now around 50v, while skews remain largely unchanged.

“Zooming out, equities, fixed income, and gold have largely shrugged off the data points previously blamed for broader market weakness, while BTC remains mostly flat,” commented QCP Capital from Singapore in a late Tuesday broadcast message. “Rising BTC dominance and falling altcoin prices suggest that altcoin bulls may already be fully long, with new dollar inflows going exclusively into BTC.”

QCP Capital added, “We remain cautious. Recent BTC demand has primarily been driven by institutions like MicroStrategy, financed through equity-linked note issuances. With crypto-related issuance accounting for about 19% of total issuance over the last 14 months, this market may be nearing saturation — potentially dampening institutional demand if the spot remains subdued.”

Prominent players like MicroStrategy have propelled BTC demand in recent weeks and months, funding their purchases by stock raises. However, rising price hype isn’t leading to increased prices, potentially cooling institutional demand and prompting significant investors to withdraw, further impacting the market.