“It feels like a day of consolidation for risk assets that have been under pressure this week,” said Shaun Osborne, chief currency strategist at Scotiabank in Toronto. The digital currency market has been struggling for months since a record crash last October sent bitcoin plummeting from a record peak and has cooled investor sentiment toward the asset. Friday’s low was the weakest level since early October 2024. That was just before Bitcoin’s rally accelerated as Donald Trump neared victory in the US presidential election after signaling his intention to support crypto during his campaign. However, market participants were leery of Friday’s recovery.
The options market showed that investors expect further losses on bitcoin as demand for downside protection increased. Data from Derive.xyz, a decentralized options platform, showed a significant increase in open interest in bitcoin, or the expectation that the price will fall further.
Traders focused on strikes of $60,000 to $50,000 before the February 27 expiration. These bets suggested that investors are betting that bitcoin will end near or at that level by that date. “It’s a one-way market. The demand for downside protection is extreme,” said Sean Dawson, head of research at Derive.xyz. “While the longer-term fundamentals for bitcoin remain intact, the options market clearly indicates that this aggressive decline could continue in the short term.”Ether rose 12% to $2,068 after similarly falling close to a 10-month low of $1,753.98 earlier in the session. The second-largest cryptocurrency was on track for its biggest daily gain since August last year. However, this week the price was still more than 9% lower.
STILL $2 BILLION LOST SINCE OCTOBER
Still, the global crypto market had lost about $2 trillion in value since peaking at $4.379 trillion in early October, even with Friday’s recovery, CoinGecko data showed, with more than $1 trillion wiped out in the past month alone.
“Bitcoin’s push back to $60,000 isn’t the death of the cryptocurrency, it’s the bill coming for government bonds and funds that treated bitcoin as a one-way asset with no real risk controls, just as we’ve seen sharp corrections in self-proclaimed safe-haven assets like gold and silver when the leverage and narrative got ahead of reality,” said Joshua Chu, co-chairman of the Hong Kong Web3 Association.
“Those who bet too much, borrowed too much or assumed prices would only rise are now finding out the hard way what true market volatility and risk management look like.”
Sentiment towards crypto was affected by the latest sell-off in precious metals and stocks. For example, gold and silver have captured the market’s attention due to their extreme volatility due to leveraged purchases and speculative flows.
On Friday, both metals regained their positions, with silver rising 8.8%, while gold rose around 4%.
Bitcoin’s fate has also been tied to the broader technology sector for some time now. The price tended to rise, mainly due to investor enthusiasm about artificial intelligence. The Dow Jones Industrial Average crossed the historic 50,000 mark on Friday and the S&P 500 finished sharply higher, while Nvidia and other chipmakers soared.
Anthony Pompliano, a major crypto investor and founder and CEO of Professional Capital Management, said the “recent sell-off is not nearly as bad as previous bear markets.”
“Bitcoiners were built for this kind of chaos in the markets. They have held the assets through many withdrawals of over 50%.”
He noted that Bitcoin has experienced a 50% decline approximately every 18 months over the past decade.
#Bitcoin #recovers #surpass #risky #assets #stabilize