Bitcoin (BTC) showed signs of recovery this Wednesday, nearing $89,000 in Asian trading hours after hitting a 24-hour low of $86,200, slightly boosting market sentiment. XRP and BNB Chain’s BNB led a gradual recovery among major cryptocurrencies, rebounding from Tuesday’s sharp sell-off that saw overall market capitalization drop by 10% and triggered at least $1.2 billion in losses on bullish bets.
The market slump on Tuesday was partly attributed to large-scale liquidations and a five-month low in a sentiment index, indicating that assets were oversold. CoinDesk’s analysis suggested that the sharp drop could lead to short-term relief as traders sought to capitalize on lower prices.
Despite the recovery, market caution remains high, with traders speculating that fresh dollar inflows would likely favor Bitcoin over altcoins. Concerns are growing that lower prices might impact equity-linked issuances for BTC, potentially dampening institutional demand.
Mixed Performance Across Cryptos
XRP rose by 3%, while BNB and Solana (SOL) posted gains of 5%. Meanwhile, Dogecoin (DOGE) and Cardano (ADA) recorded modest increases of 1.2%. In contrast, Tron (TRX) was down by 5% in the past 24 hours. The broad-based CoinDesk 20 index fell by 2%, reflecting mixed performance across the market.
The modest recovery was consistent with expectations of a short-term rebound, as analysts noted that the sharp drop on Tuesday left the market oversold. This sentiment was echoed by QCP Capital, which remarked that despite the broader market weakness, Bitcoin remained relatively flat, suggesting cautious optimism among traders.
Macro Factors Influencing Market Sentiment
Several macroeconomic factors contributed to Tuesday’s market turmoil, including over $1 billion in outflows from Bitcoin ETFs and a stronger yen, which typically drives investors away from riskier assets.
U.S. consumer confidence dropped to its lowest level since August 2021, leading to increased expectations of easier U.S. Federal Reserve monetary policy. Prediction markets now indicate a 30% chance of a rate cut in May, with the possibility of two rate cuts by June tripling to 15%. This has fueled hopes of renewed retail participation in crypto markets as idle cash frees up.
However, skepticism remains high, particularly regarding the potential for an altcoin rally. Market analysts believe that institutional investors continue to drive BTC demand, while altcoins lag behind.
ETF Outflows Signal Cautious Investor Sentiment
Bitcoin ETFs recorded substantial outflows on Feb. 25, totaling $937.9 million — the largest outflow in six consecutive days of declines. The Fidelity Wise Origin Bitcoin Fund saw a record outflow of $344.7 million, followed by BlackRock’s iShares Bitcoin Trust with $164.4 million in outflows. Other major funds, including the Bitwise Bitcoin ETF and Grayscale’s Bitcoin Trust, also recorded significant losses.
According to CoinGlass data, $2.4 billion has exited the 11 largest Bitcoin ETFs so far this month, reflecting a cautious investor sentiment. The continued outflows coincide with Bitcoin trading below $90,000, a stark contrast to its all-time high above $108,000 reached just a month ago.
Shogun Lin
