Market Rebounds After Sharp Sell-Off

Bitcoin has climbed back above the crucial $70,000 level, staging a notable recovery after plunging close to $60,000 earlier this month. The world’s largest cryptocurrency is up nearly 5% in the past 24 hours, signaling renewed buying interest after a volatile stretch.

The broader market joined the rebound, with the CoinDesk 20 Index gaining over 6% during the same period, reflecting improved sentiment across major digital assets.

Inflation Data Fuels Risk Appetite

The rally was triggered by cooler-than-expected U.S. inflation data. January’s Consumer Price Index (CPI) rose 2.4% year-over-year, slightly below forecasts of 2.5%.

This softer inflation print revived hopes that the Federal Reserve could begin cutting interest rates sooner than previously expected.

Lower interest rates typically boost risk assets such as cryptocurrencies and equities, as returns on safer investments decline. Following the data release, traders increased bets on potential rate cuts in the coming months, driving both stock and crypto markets higher.

Fear Still Dominates the Market

Despite the price recovery, underlying sentiment remains fragile.

The Crypto Fear & Greed Index continues to sit in “extreme fear” territory , levels last seen during the 2022 bear market following the collapse of FTX. The index has remained in extreme fear since the beginning of the month, signaling that investors are still cautious.

Market analysts warn that fear, not fundamentals, is currently the dominant force driving short-term behavior.

$8.7 Billion in Realized Losses

Over the past week, approximately $8.7 billion in Bitcoin losses were realized , one of the largest loss events in recent history, second only to the fallout from Three Arrows Capital (3AC).

Such large-scale realized losses are often described as “capitulation events,” where weaker holders exit positions under pressure. Historically, these events can mark transitional phases in market cycles.

Analysts suggest that supply is gradually shifting from short-term traders to long-term conviction investors , a redistribution process that may help stabilize prices over time, though it typically unfolds gradually rather than instantly.

Treasury Firms See Losses Shrink

Bitcoin treasury firms were recently sitting on more than $21 billion in unrealized losses , an all-time high. As Bitcoin rebounded above $70,000, that figure declined to approximately $16.9 billion, offering some relief to institutional holders.

Thin Liquidity and Seller Exhaustion

Weekend trading volumes have been relatively thin, which can amplify price moves. Some analysts believe the recent bounce reflects seller exhaustion after the heavy liquidation wave.

However, persistent fear remains a key headwind. Many investors are reportedly using price rallies as exit opportunities, limiting upside momentum.

What Happens Next?

The key question now is whether this rebound marks the beginning of a broader stabilization phase , or merely a temporary relief rally within a fearful market environment.

If higher-conviction holders continue accumulating and macro conditions improve, the market could gradually regain strength. But as long as extreme fear dominates sentiment, volatility is likely to remain elevated.

For now, Bitcoin’s return above $70,000 offers short-term optimism , but the psychological battle between fear and conviction is far from over.