'The Fear' When Bitcoin Recovers

According to data from CoinMarketCap, the price of Bitcoin has shown a recovery trend in recent days but plummeted shortly after. Currently, the largest cryptocurrency in the world is being traded around the 84,000 USD/BTC mark, up 11% from the recent short term low established in mid-month. This recovery has helped Bitcoin’s market capitalization rise to 1.66 trillion USD. However, compared to its all-time high, Bitcoin’s market capitalization is still 23% lower. The possibility of a bullish trap According to Bloomberg, Bitcoin’s recovery is at risk of not lasting long as ongoing market uncertainty continues to make investors choose to stay on the sidelines. The lack of price momentum, low trading volume, and macroeconomic tensions have left the market in a state of unclear direction. Experts point out that macroeconomic risks, including the potential increase in tariffs, inflation, and geopolitical instability, are overshadowing Bitcoin’s price movements. “Investors need to be cautious in this environment. The market remains fragile and can easily be manipulated. Individual liquidity is low, trading volumes are thin, and even the smart money group is standing on the sidelines. Those who have the real ability to impact the market have not yet stepped in and have reasons for doing so,” Kirill Kretov, an automated trading expert at CoinPanel, warned.

Throughout March, Bitcoin fluctuated between 76,000-95,000 USD/BTC and there were no clear catalysts to push the price beyond this range. This made it difficult for the market to maintain a sustainable upward trend. One indicator of the market’s cautious sentiment is the funding rate ( of Bitcoin, which reflects the difference between the spot price and the futures price. In a bullish market, the futures price is usually higher than the spot price, resulting in a positive funding rate. However, even though Bitcoin increased by over 4% to 88,786 USD on March 24, the rate remains negative. A negative funding rate reflects a change in market sentiment and a decrease in the demand for leverage. This indicates that traders are no longer willing to pay fees to open new long positions in the Bitcoin perpetual futures market. These contracts do not have a fixed expiration date and are often used by speculators looking to profit from short term price fluctuations. Another signal indicating indecision in the market is that the borrowing costs for stablecoins such as Tether’s USDT and Circle’s USDC on the decentralized lending platform Aave have dropped to around 4%. This reflects the risk-averse sentiment of investors as they are no longer interested in using leverage in cryptocurrency trading. “On Aave, the lending interest rate is affected by the utilization rate of deposited assets. When the demand for leverage and borrowing capital for trading strategies declines, the lending interest rate on Aave also decreases,” explained Strahinja Savic, head of data and analytics at FRNT Financial. The risk of total liquidation In addition, long-term Bitcoin holders from previous cycles are still maintaining their positions, expecting prices to be higher before exiting the market. According to Kretov, this creates a significant barrier that makes the market susceptible to strong fluctuations. While volatility can cause retail traders using leverage to get “blown away,” Kretov believes that a comprehensive liquidation, where even long-term investors are forced to capitulate, is necessary for major institutions to enter the market with a “clean” foundation for new positions. “Until that happens, recoveries like the current one are very dangerous. They can lead impatient investors to jump into buying positions, a typical example of a bull trap in a low liquidity environment,” the expert added. According to Augustine Fan, a partner at the cryptocurrency derivatives software provider SignalPlus, to gain a clearer view of market trends, investors are monitoring U.S. President Donald Trump’s plan to impose additional tariffs on April 2. “We expect the market to continue a slight recovery by the end of the month, with the next major impetus being the announcement regarding tariffs on April 2,” Fan commented.