Bitcoin reclaimed nearly $69,000 on Wednesday, up more than 10% from Tuesday’s low as crypto markets staged a broad relief rally after a long period of pessimism.
Ethereum ether (ETH), Solana native tokens (SOL) and all posted double-digit gains, extending a move that had many traders turning in the wrong direction.
Digital asset stocks, which have fallen in recent months amid falling cryptocurrency prices, also saw a relief rebound. Stablecoin issuer Circle (CRCL) jumped 34% after its earnings report, while crypto exchange Coinbase (COIN) jumped 14%. Strategy (MSTR), the largest Bitcoin holding company, climbed 9% and ether cash company BitMine rose 12%.
The broad-based rally provided a welcome respite after weeks of persistent selling pressure and fears of an upcoming decline.
Nonetheless, analysts have warned that despite the strong rally in tokens and stocks, crypto markets are not yet out of the woods, with key resistance levels and macroeconomic risks still looming.
While there was no immediate catalyst behind Wednesday’s move, extreme fear and bearish positioning in crypto markets were ideal conditions for a violent counter-trend advance, according to Joel Kruger, market strategist at LMAX Group.
“Crypto assets have been under significant pressure in recent months and were awaiting a technical rebound,” he wrote. “The market has developed a significant tactical selling bias, making it vulnerable to strong pressure in limited stocks.”
Still, Kruger cautioned against viewing this rebound as the start of a lasting uptrend.
“Given the abrupt nature of the recovery and the lack of a clear trigger – particularly against a backdrop of tighter liquidity conditions – this progression should be treated with caution,” he said.
Chasing the rally
Joshua Lim, global co-head of markets at FalconX, said his office is seeing strong demand for bullish ether bets in the options market. Specifically, traders are buying call options and call spreads between $2,000 and $2,200 over the next two to three weeks, looking to profit from further near-term upside.
Lim added that some funds are also “continuing this rally” by moving into higher-volatility altcoins and using options to amplify potential gains – a sign that risk appetite has quickly recovered after the recent rebound.
Adding a bit of complexity, approximately 115,000 BTC options worth $7.49 billion will expire on Friday at the end of the month. The so-called “maximum pain” – the price level at which the greatest number of options expire worthless – currently sits at around $75,000, noted Wintermute over-the-counter trader Jasper De Maere. The “maximum pain” point can sometimes act as a magnetic level until exhalation, although dealer positioning seems weak, he said.
“Fundamental indicators are still not convincing that this strength will continue,” De Maere added.
Levels to watch
Technically, bitcoin faces strong resistance in the $70,000 and $72,000 area, where recent rebounds have ground to a halt as sellers have stepped in. Overcoming these levels would be the first challenge to transform the rebound into a sustainable rise.
Bitfinex analysts also highlighted $78,000, where the “True Market Mean,” an on-chain valuation metric for estimating the fair value of Bitcoin based on real capital flows in the network, currently stands.
This level needs to be recovered on a sustained weekly basis before the structural situation improves, Bitfinex analysts said.
