Is a double-digit rebound market about to start, with Bitcoin leading the reversal momentum?

Author: Nancy, PANews

As a driving force behind the global stock market crash, the Japanese stock market triggered the circuit breaker mechanism twice during this period. Today (August 7), Bank of Japan Deputy Governor Shinichi Uchida spoke for the first time after this historical stock disaster in Japan, reassuring the market that if financial markets remain unstable, the Bank of Japan will not raise policy interest rates. Meanwhile, improvements in U.S. economic indicators have alleviated recession concerns, releasing some bullish sentiment, and the U.S. stock market has stabilized and rebounded. Stimulated by a recovery in risk appetite in the financial markets, market sentiment has been boosted, leading to a significant rebound in the crypto market.

With the rebound trend, trading volume hits new highs as bottom-fishing funds enter the market

The improvement in market risk appetite has somewhat eased investors' anxiety. According to alternative data, today (August 7), the Fear and Greed Index is at 29, indicating that panic sentiment has eased compared to yesterday, but concerns still linger in the market.

The crypto market has recovered some ground with a strong rebound, with the total market capitalization rebounding to over $2 trillion. CoinGecko data shows that the total market capitalization of cryptocurrencies is $2.1 trillion, with BTC's market share at 52.4%, reaching a new high since April 2021, and ETH's market share at 14.2%.

As of the time of writing, Binance data shows that Bitcoin's price has strongly rebounded to over $57,000, a maximum increase of 16.9% from the lowest point of this round of decline; Ethereum has risen 21.1% from its low, reaching over $2,500 at its peak. Additionally, Solana has also experienced a strong rebound, with an increase of 37.9% from its low, and TradingView data shows that as of the time of writing, the SOL/ETH ratio has reached 0.0599, setting a historical high.

At the same time, trading volume in the crypto market has continuously hit new highs during this period. Dune data shows that the daily trading volume of DEX exceeded $20.2 billion on August 5, marking the third-highest record in history, with the previous two records being during the Silicon Valley Bank run ($23.1 billion) and the May 2021 flash crash ($22.8 billion); Blockchain.com data also shows that Bitcoin's trading volume on August 6 set a new high since the halving, with a trading volume exceeding $1.14 billion.

Behind the high trading volume, many institutions and whales have seized the opportunity to bottom-fish. Crypto analyst Ali stated on the X platform yesterday that the surge in outflows from exchanges and the decrease in BTC supply held by exchanges indicate that in the past 48 hours, Bitcoin whales have acquired over 30,000 BTC, worth approximately $1.62 billion; according to Lookonchain monitoring, when the market panic-sold due to the crash, the entity "7 Siblings," with assets of $1.57 billion, quietly bought 56,093 ETH ($12.9 million) at an average purchase price of $2,305. Additionally, five whale addresses accumulated a total of 144,071 ETH (approximately $330 million) during this period; @ai_9684xtpa monitored that Amaranth Foundation founder James Fickel bought 4,336 ETH (approximately $10.94 million) on-chain at an average price of $2,523; IntoTheBlock pointed out that wallets holding 1,000 to 10,000 BTC have shown confidence during the recent price decline, continuously increasing their holdings.

Moreover, institutional digital asset broker FalconX also tweeted that institutions are buying the dip during this crash, noting that in observations on August 7, almost all investors were net buyers, including proprietary trading desks (57% of total buy flow), hedge funds (63%), venture funds (61%), and retail aggregators (72%), stating, "Last week, the buy/sell ratio was below 50%, but today it has exceeded 50%." Among them, Bitcoin remains the largest crypto asset, with trading volume 2.8 times that of ETH, and the trading volume of these two is more than double that of altcoins.

Rebound or reversal? Market concerns are excessive, but caution is still needed in the short term

Regarding the recent global stock market sell-off, most believe it is a panic-driven decline resulting from an overreaction in market sentiment. With the warming of global financial markets, is the recent crypto market improvement a technical rebound or a market reversal?

Rob Hadick, a partner at Dragonfly, believes that the market may still experience pain in the short term, but the medium to long-term outlook is bullish. He explained that the significant deleveraging event brought about by yen carry trades this week is not expected to last beyond this week, but there remains a certain contagion risk from the aforementioned event. The likelihood of Japan intervening financially is higher, which will help mitigate some risks. At the same time, concerns over certain U.S. economic data indicators have been exaggerated, and most prudent funds believe these concerns have been oversold. Stocks are expected to rebound strongly when risk appetite recovers, but an emergency rate cut is unlikely, which will maintain market panic ahead of the Jackson Hole meeting. Additionally, Iran seems to be retracting its most destructive rhetoric, which should help avoid large-scale conflict. In the coming months (less than a year), the market will see new quantitative easing policies, significant rate cuts, and ultimately a resumption of accelerated business cycle growth.

He also added that non-crypto-native investors are unlikely to return for a long time, as this group has been over-leveraged in long-tail assets. The upcoming liquidity recovery may focus on mainstream cryptocurrencies, and most altcoins may never (or barely) reach historical highs, especially those without strong product-market fit (PMF) or long-term expectations.

Crypto investment firm QCP Capital also stated that discussions about emergency rate cuts… are unlikely, as this would severely damage the Federal Reserve's credibility, exacerbating market panic and people's belief in an impending recession. The firm believes that asset prices may continue to fluctuate until the Fed and the Bank of Japan clarify their policies, and the market will remain turbulent. With the price crash, it may now be time to start considering accumulating Bitcoin and Ethereum spot.

Raoul Pal, founder of Real Vision, stated that this is a severe washout and a reset of risk leverage, with strong upward movements expected to be a general characteristic of 2024/2025. The coming week is the last opportunity to enter or fully build positions for 2024/2025. However, the liquidity/policy response will take time, as every government and central bank wants a weaker dollar and lower interest rates, so they may prefer to let this situation persist for a while before stopping. The Fed's eventual rate cuts will also bring a period of dollar weakness, which will help shape the macro summer/fall. The market is currently in an extreme fear zone; hold on and develop a plan that suits your risk tolerance and time frame. Stay safe; those who wait will be rewarded. The market is never easy, and the task of a bull market is to try to disappoint you; this too shall pass.

"Since the yen carry trade began to unwind, Bitcoin has experienced significant price volatility, and the reduction in open interest and negative funding rates indicate a greater likelihood of Bitcoin consolidating. It is expected that the central bank's imminent intervention will make Bitcoin appear attractive at current price levels," said Bloomberg crypto analyst Jamie Coutts.

Coinbase researcher David Duong stated that Tuesday's market conditions suggest the possibility of a short squeeze in the context of increased trading activity on centralized exchanges. He believes the market will remain turbulent in the short term, but shorts may be squeezed here, potentially leading to a rebound in the market in the coming days. The recent decline in the crypto market does not signify the beginning of a new long-term trend or market cycle; rather, the current sell-off aligns with the defensive strategies we adopted in Q3 2024 and a more constructive outlook for Q4 2024.

Additionally, Ki Young Ju, founder and CEO of CryptoQuant, also stated on the X platform that as long as Bitcoin can stay above $45,000, it may break its historical high again within a year. Although some indicators currently show bearish signals, a rebound is still possible, so it is necessary to observe whether it can maintain this level for a week or two. If the duration is prolonged, the risk of a bear market will increase, and if it lasts more than a month, recovery may become difficult.