The crypto market has steadied after last week's sell-off, with Bitcoin posting a double-digit rebound even as analysts caution the rally may not be sustained.
The bounce coincides with an improvement in U.S. investor appetite.
A rising premium suggests renewed buying interest from U.S. investors.
“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.” Ryan Yoon, senior analyst at Seoul-based Tiger Research, told Decrypt.
Aggregated open interest—the total number of open derivatives contracts—has declined, while the cumulative volume delta has turned positive. Such a combination typically indicates that investors are primarily closing short positions.
“This rally is mostly short covering and a short squeeze after the capitulation flush,” Andri Fauzan Adziima, research lead at Bitrue, told Decrypt. “Open interest deleveraging cleared longs, spot CVD turned up, and Coinbase premium improved, but it's relief mechanics, not fresh demand.”
A short squeeze occurs when traders who have bet against an asset are forced to buy it back to limit losses as the price rises, thereby further fueling the rebound.
Still, experts remain cautious, noting the underlying demand may not be sustainable.
“The relief rally is a post-crash dead-cat bounce or a classic relief after heavy liquidations and panic,” Bitrue’s Adziima said. The uptick has “no real sustained demand yet as the Coinbase premium index remains negative and macro headwinds persist.”
That macro environment has seen a slight improvement, however, with Asian equities rallying after Japan’s Prime Minister Sanae Takaichi’s landslide election win. The Nikkei 225 shot up 5% on the news, easing some regional risk-off pressure.
What’s next?Analysts see the short-term bounce as technically driven but believe the long-term trajectory remains tied to broader macro conditions.
“We remain optimistic that a rebound may happen this year as institutional adoption advances while global regulators enable friendlier policies for RWAs and stablecoins,” Nick Ruck, director of LVRG Research, told Decrypt.
“For a definitive trend reversal, we need to see robust, structural demand such as nation-state strategic reserves positioning Bitcoin as a legitimate gold alternative,” Yoon said.
Other experts point to a clearing of overhanging risks.
“We think that the crash has simply led traders to deleverage their positions, which is why you see open interest falling,” Jeff Mei, COO at BTSE, told Decrypt.
Major tech company earnings have been blamed for the recent crash across risk assets. With those earnings reports now in the rear view, Mei expects an easing of overhead pressures.
“If upcoming U.S. economic data releases reflect a growing economy and lower unemployment and inflation, then it's likely that cryptocurrency prices will continue to recover,” he said.
