Bitcoin, 8.7 billion dollars loss, recovers to 70k as inflation eases.
Despite the price recovery, the Crypto Fear & Greed index remains in “Extreme Fear” and signals underlying market unease.
Last week Bitcoin realized losses totaled $8.7 billion, potentially signaling capitulation and a shift of supply to stronger hands.
Crypto assets rose about 5% over the last 24 hours, while the broad CoinDesk 20 (CD20) index gained 6.2% in the same period.
The rally came as investors responded to cooler-than-expected US inflation data and renewed risk-on sentiment.
January’s consumer price index rose 2.4% year over year, slightly below the 2.5% consensus, fueling expectations that rate cuts may come sooner than anticipated.
That prospect supported gains in both equities and cryptocurrencies; lower rates make risk assets more attractive.
Traders priced in a higher probability of a 25 basis-point rate cut in April, rising from about 19% to roughly 26%.
The rally, however, masks deeper cracks beneath the surface.
Bitwise analysts noted that last week Bitcoin losses totaled $8.7 billion, the second-largest after the Three Arrows Capital collapse.
Nevertheless, the rotation of supply from weak hands to more confident holders has historically been associated with market stabilization, though the process takes time.
Bitcoin holders’ unrealized losses topped $21 billion earlier, a record, with the figure easing to $16.9 billion as prices recovered.
Thin volume has underpinned the current rally and the exhaustion of sellers over the weekend.
Last week’s $8.7 billion in realized losses has been described as textbook capitulation.
Yet the extreme fear enveloping the market presents challenges.
Bitwise analyst Danny Nelson told CoinDesk that “the dominant driver right now is fear, the fear of a fall.”
That fear is causing investors to view an upcoming rally as a selling opportunity.
It remains to be seen whether this continues or if holders with higher conviction reallocate, shifting the market direction.
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