Crypto Market Shows Signs of Recovery, Researcher Comments

After a tumultuous Monday that saw over $1 billion in leveraged cryptocurrency positions liquidated and major tokens dropping by as much as 20%, the crypto market is showing tentative signs of recovery.

David Duong, a researcher at Coinbase, noted on Tuesday that current market conditions indicate the potential for a short squeeze. Increased buying activity on centralized exchanges suggests that market jitters may persist in the short term, but there is a possibility that short positions could be squeezed, leading to a market rebound.

Crypto Price Recovery

Over the past 24 hours, crypto liquidations have been roughly balanced between long and short positions. Data from Coinglass indicates that out of $425 million in total liquidations, approximately $212 million were long positions, and over $212 million were short positions at the time of writing.

The prices of major cryptocurrencies such as Bitcoin and Ether have shown signs of recovery. Bitcoin is trading around $55,000, up approximately 6.5% in the past 24 hours, although it remains down by 17% over the past week. Similarly, Ether is trading around $2,450, marking a 7% increase since Monday afternoon.

CoinMarketCap data reveals that the global crypto market cap stands at $1.95 trillion, marking a 8% increase over the last 24 hours.

Certain Factors to Keep in Mind

Despite these gains, Duong emphasized that certain factors continue to weigh on the market. He pointed out, “There are in-kind Bitcoin and Ethereum distributions by Genesis as part of its bankruptcy liquidation plan. The unwind of Japanese yen-based carry trades may also be affecting the decisions of Mt. Gox creditors receiving their Bitcoin at the moment.”

Moreover, the Bitcoin futures funding rate has remained negative over the past 24 hours, suggesting high demand for short positions. This indicates that many traders are still betting on a decline in Bitcoin’s price, reflecting ongoing market uncertainty.

A Word of Caution

In light of recent volatility, Duong cautioned that the recent market decline does not necessarily signal the beginning of a new long-term trend. “The current pullback in the cryptocurrency market does not represent the start of a new market cycle. Rather, the current sell-off is consistent with our defensive approach in 3Q24 and more constructive outlook for 4Q24, albeit the strength of this move tests our conviction,” he explained.

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