Bitcoin has experienced a notable recovery, surging 12% from its low of $62,822 on Friday to a current price of $70,998. This rebound is closely associated with a significant 70% increase in the Coinbase Premium index, which measures the disparity between Bitcoin prices on Coinbase and Binance. According to data from CoinGlass, the index has improved from -0.23% on Friday to -0.06% during early Asian trading on Monday.
The rise in the Coinbase Premium indicates a resurgence of buying interest among U.S. investors. Ryan Yoon, a senior analyst at Tiger Research in Seoul, commented, “The Fear & Greed Index hitting an extreme low of 5 suggests this bounce is a powerful short-covering rally and a technical reaction to an oversold market washout.” This perspective highlights the prevalence of short-covering, where traders who have bet against the asset are forced to buy back their positions, amplifying the price increase.
A deeper analysis of the derivatives market reveals that the current rally is primarily driven by bearish traders exiting their positions rather than a new wave of bullish sentiment. Data from Velo indicates that aggregated open interest, which reflects the total number of open derivatives contracts, has decreased, while the cumulative volume delta has turned positive. This trend typically signals that investors are closing short positions rather than initiating new long ones.
Andri Fauzan Adziima, research lead at Bitrue, stated, “This rally is mostly short covering and a short squeeze after the capitulation flush.” He noted that while the improvement in the Coinbase premium and spot cumulative volume delta (CVD) are positive signs, this relief rally lacks genuine demand. He described it as a response to recent heavy liquidations and panic rather than the emergence of fresh buying interest.
Despite the current optimism, experts caution that the sustainability of this recovery remains uncertain. Adziima remarked that there is “no real sustained demand yet as the Coinbase premium index remains negative and macro headwinds persist.” Nonetheless, there have been slight improvements in the macroeconomic landscape, particularly following Japan”s Prime Minister Sanae Takaichi”s election victory, which boosted Asian equities, including a 5% rise in the Nikkei 225.
Looking ahead, analysts view this short-term bounce as largely technical. They emphasize that the long-term outlook for Bitcoin is still closely linked to broader macroeconomic conditions. Nick Ruck, director of LVRG Research, expressed cautious optimism, suggesting that institutional adoption could drive future rebounds. For a significant trend reversal, robust structural demand is essential, such as positioning Bitcoin as a legitimate alternative to gold in national reserves.
Jeff Mei, COO at BTSE, echoed this sentiment, indicating that traders have been deleveraging post-crash, which accounts for the declining open interest. He noted that the recent crash in risk assets has been influenced by major tech earnings, and with those reports now behind, the market may experience less overhead pressure. If upcoming U.S. economic data suggests a strengthening economy with lower unemployment and inflation rates, it could further bolster the recovery of cryptocurrency prices.
