The sentiment in the crypto circle remains fragile, and the positive news from the end of the US government shutdown hasn't led to a significant rebound in Bitcoin.

Article by: Ye Huiwen

Source: Wall Street Journal

After experiencing a massive loss of hundreds of billions of dollars in market capitalization last month, Bitcoin is struggling to rebound. However, fragile market sentiment and ongoing selling pressure are making any recovery attempts difficult.

Although positive news about the end of the U.S. government shutdown boosted traditional risk assets, the cryptocurrency market did not see the expected strong rally, highlighting lingering investor unease after significant losses.

This largest global cryptocurrency briefly surged past $107,000 on Monday but quickly fell back below $105,000. This weak price performance contrasts sharply with the rally in stocks and credit markets driven by the reopening of the U.S. government, indicating that internal momentum in crypto assets remains insufficient.

According to Bloomberg, since October 10, when Trump unexpectedly announced tariffs triggering record liquidations, Bitcoin’s market cap has shrunk by approximately $340 billion. The market generally attributes the recent downturn partly to early large holders (“OG whales”) taking profits near the yearly high, as well as the lingering shadow of large-scale liquidations in early October.

Signs of weakness are confirmed by several key indicators. Data measuring market sentiment and leverage levels show that investor enthusiasm has not yet recovered. Meanwhile, critical resistance levels on technical charts continue to exert heavy pressure on prices, with market participants divided on the outlook.

Key Indicators Show Lack of Momentum

A series of data points suggest that the upward momentum for Bitcoin has not returned. The total open interest in Bitcoin perpetual futures is currently around $68 billion, well below the peak of $94 billion last month, reflecting a significant cooling of speculative interest in derivatives markets. Additionally, funding rates used to measure leverage costs remain stable, indicating traders are not actively increasing leverage long positions.

More notably, spot Bitcoin ETFs, a major source of new market funds, have performed modestly. Bloomberg data shows that despite the U.S. stock market rallying across the board on Monday, Bitcoin ETFs listed in the U.S. saw only $1 million in net inflows that day. George Mandres, senior trader at XBTO Trading, pointed out that the insufficient new capital inflow from ETFs continues to impact market risk sentiment.

Technical Resistance Levels

From a technical perspective, Bitcoin also faces challenges. Its price remains below the 200-day moving average (currently near $110,000), which analysts generally see as a critical threshold for any sustained upward trend.

Tony Sycamore, analyst at IG Australia, stated that the price needs to break above the 200-day moving average to significantly boost confidence that the uptrend has resumed. Alex Kuptsikevich, chief market analyst at FxPro, also observed that the broader crypto market cap, around $3.62 trillion, faces technical resistance at the 50-day moving average. He believes the market may be forming a new, lower local high, continuing a downtrend that started over a month ago.

Rachael Lucas of BTC Markets added that $103,000 is a key structural support level. Falling below this could open the door for prices to drop toward $86,000 or even deeper to $82,000 (aligned with the 100-week moving average). Any breakdown of these levels could reignite selling pressure.

Market Divergence: Dead Cat Bounce or Trend Reversal?

Market participants have widely divergent views on Monday’s brief rally. Some see it as a temporary respite within a bear market, while others look for early signs of trend reversal.

George Mandres bluntly said this rebound “feels like a dead cat bounce.” He believes that sentiment in the crypto space differs from stocks, with much attention on the narrative that early Bitcoin buyers are selling large amounts of tokens, which is exerting supply pressure and weakening risk appetite. Kuptsikevich also noted that the market is clearly not yet ready to shift into “euphoria,” as profit-taking continues after the recent surge.

However, some analysts hold a relatively optimistic view. Tony Sycamore pointed out that the most notable feature in the past 24 hours was Bitcoin briefly tracking risk assets higher after the decoupling last month. He considers this a “positive sign” and technical analysis suggests that the correction from the $126,272 high could have been completed at the recent low of $98,898.

Rachael Lucas described the recent rally as a “classic short-covering bounce, mixed with some FOMO (fear of missing out) among institutions.” This perspective implies that the current rise is driven more by market structural factors rather than a solid return of fundamental confidence.