Bitcoin bounced back near $69,000 on Wednesday and rallied more than 10% from Tuesday’s lows as crypto markets staged a broad relief rally after an extended stretch of pessimism.
Ethereum’s Ether (ETH), native tokens of Solana (SOL) and all posted double-digit gains, extending a streak that caught many traders leaning the wrong way.
Digital asset stocks, which have been hit lower in recent months amid falling crypto prices, also enjoyed relief. Stablecoin issuer Circle ( CRCL ) rose 34% after the earnings report, while crypto exchange Coinbase ( COIN ) rose 14%. Strategy (MSTR), the largest corporate holder of bitcoin, rose 9%, and ether tax company BitMine rose 12%.
The broad-based rally offered a welcome reprieve after weeks of persistent selling pressure and fears of another leg lower.
Still, analysts cautioned that despite the sharp jump across tokens and stocks, crypto markets are not out of the woods yet, with key resistance levels and macro risks still looming.
While there was no immediate catalyst behind Wednesday’s move, extreme fear and bearish positioning across crypto markets were the key conditions for a violent countertrend advance, according to Joel Kruger, market strategist at LMAX Group.
“Crypto assets have been heavily pressured in recent months and overdue for a technical retrenchment,” he wrote. “The market had built up a meaningful tactical short bias, leaving it vulnerable to sharp pressures on limited headlines.”
Still, Kruger cautioned against calling the setback the start of a sustainable uptrend just yet.
“Given the steep nature of the rally and the absence of a clear trigger – especially against the backdrop of thinner liquidity conditions – the advance should be treated with caution,” he said.
Chasing the convention
Joshua Lim, global co-head of markets at FalconX, said his desk is seeing strong demand for bullish bets on ether in the options market. Specifically, traders are buying call options and call spreads in the $2,000-$2,200 range over the next two to three weeks, looking to take advantage of additional near-term upside.
Lim added that some funds are also “chasing this rally” by rotating into higher-volatility altcoins and using options to amplify potential gains – a sign that risk appetite has risen rapidly following the recent rally.
To add some complexity, about 115,000 BTC options worth $7.49 billion will expire on Friday at the end of the month. The so-called “max pain” — the price level at which the largest number of options expire worthless — currently stands at around $75,000, noted Wintermute OTC trader Jasper De Maere. The “max pain” point can sometimes act as a magnetic level for expiration, even if dealer positioning appears weak, he said.
“Fundamental indicators are still not convincing that this strength will see much follow-through,” De Maere added.
Levels to see
Technically, bitcoin is facing stiff resistance in the $70,000 and $72,000 zone, where recent rallies have stalled as sellers entered. Overcoming these levels would be the first challenge in turning the bounce into a lasting move higher.
Bitfinex analysts also pointed to $78,000, where the “True Market Mean,” an onchain valuation metric to estimate bitcoin’s fair value based on actual capital flows into the network, currently sits.
That level needs to be recovered on a sustained weekly basis before the structural picture improves, Bitfinex analysts said.
