bitcoin recovered near $69,000 on Wednesday, rising more than 10% from Tuesday’s low, as crypto markets staged a broad relief rally after a prolonged period of pessimism.
Ethereum ether (ETH), native Solana tokens (SOL) and all posted double-digit gains, extending a move that caught many traders leaning the wrong way.
Digital asset stocks, which have fallen in recent months amid falling cryptocurrency prices, also enjoyed a relief rally. Stablecoin issuer Circle (CRCL) surged 34% following its earnings report, while cryptocurrency exchange Coinbase (COIN) jumped 14%. Strategy (MSTR), the largest corporate holder of bitcoin, rose 9% and ether treasury firm BitMine advanced 12%.
The broad-based rally offered a welcome respite after weeks of persistent selling pressure and fear of an upcoming decline.
Still, analysts warned that despite the strong bounce between tokens and stocks, crypto markets are not out of the woods yet, 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 the primary conditions for a violent counter-trend advance, according to Joel Kruger, market strategist at LMAX Group.
“Crypto assets have come under severe pressure in recent months and it is about time they technically recovered,” he wrote. “The market had developed a significant tactical short bias, leaving it vulnerable to strong pressures on limited headlines.”
Still, Kruger cautioned against viewing the bounce as the start of a long-lasting uptrend.
“Given the abrupt nature of the rally and the absence of a clear trigger – particularly in the context of weaker liquidity conditions – the advance should be treated with caution,” he said.
Chasing the rally
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 to $2,200 range over the next two to three weeks, looking to benefit from further short-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 increased rapidly after the recent rally.
To add some complexity, approximately 115,000 BTC options worth $7.49 billion will expire on Friday at the end of the month. The so-called “peak pain” – the price level at which the largest number of options expire worthless – is currently around $75,000, noted Wintermute OTC trader Jasper De Maere. The “peak pain” point can sometimes act as a magnetic level toward expiration, although dealer positioning appears weak, he said.
“The fundamental indicators still do not convince us that this strength will have a strong follow-up,” De Maere added.
Levels to observe
Technically, bitcoin faces strong resistance in the $70,000 and $72,000 zone, where recent rallies have stalled as sellers intervened. Breaking through those levels would be the first challenge in turning the bounce into a lasting bullish move.
Bitfinex analysts also pointed to $78,000, where the “true market average” currently lies, an on-chain valuation metric for estimating the fair value of bitcoin based on actual capital flows into the network.
That level must recover steadily on a weekly basis before the structural outlook improves, Bitfinex analysts said.
