Bitcoin has experienced a notable recovery, surging 12% from its recent low of $62,822, now trading around $70,998, according to CoinGecko data. This rebound is accompanied by a sharp increase in the Coinbase Premium, which measures the price difference between Bitcoin on Coinbase and Binance, climbing over 70% from -0.23% last Friday to -0.06% during early Asian trading on Monday, as reported by CoinGlass.
Despite this positive movement, analysts advise caution. The current upswing may resemble a classic “dead cat bounce,” primarily attributed to short-covering and a squeeze, as noted by experts from Decrypt. Ryan Yoon, a senior analyst at Tiger Research, emphasized that the extreme low reading of the Fear & Greed Index at 5 indicates this bounce is largely a technical reaction to an oversold market.
A deeper analysis of derivatives metrics supports the view that this rally is predominantly driven by bearish traders closing their positions. Data from Velo shows that while aggregated open interest has decreased, the cumulative volume delta has turned positive, indicating that many investors are exiting short positions.
Andri Fauzan Adziima, research lead at Bitrue, remarked that the current rally is fundamentally a product of short covering and market relief following a period of capitulation. He pointed out that while open interest has decreased, the improvement in the Coinbase premium suggests a temporary relief rather than sustained demand.
Market conditions have improved slightly following Japan”s recent election, which saw Prime Minister Sanae Takaichi secure a decisive victory, contributing to a 5% increase in the Nikkei 225 and alleviating some regional risk-off sentiment.
Looking ahead, analysts foresee that the trajectory of Bitcoin”s price will largely depend on macroeconomic factors and forthcoming U.S. economic data. Nick Ruck, director at LVRG Research, expressed optimism about a potential rebound this year, driven by increased institutional adoption and favorable regulatory policies.
However, a definitive trend reversal will necessitate robust demand, particularly if nation-states begin to position Bitcoin as a credible alternative to gold. Jeff Mei, COO at BTSE, noted that the recent downturn in the market was influenced by major tech companies” earnings reports. With these reports now behind, he anticipates a reduction in overhead pressures, which could support a continued recovery in cryptocurrency prices.
