Bitcoin rebounds close to $69,000, but experts caution that the market could still face challenges.

Cryptocurrency experiences a significant recovery from Tuesday’s lows, although traders are uncertain if this movement signifies a permanent shift or merely another temporary rebound.

Bitcoin analysts express caution as the price approaches $69,000 (Spencer Platt/Getty Images)

What to know:

• Bitcoin surged back to $69,000 in a sudden short squeeze that invigorated altcoins such as ETH, SOL, DOGE, and ADA, along with crypto-associated stocks like Circle, Coinbase, Strategy, and BitMine, following weeks of downward pressure.
• The resurgence seems to be a technical rebound prompted by bearish sentiment and limited liquidity, rather than driven by definitive fundamental triggers, with LMAX Group’s Joel Kruger advising caution regarding its sustainability.
• Certain funds are pursuing the rally, shifting towards high-volatility altcoins and options, according to FalconX’s Joshua Lim.
• To indicate a stronger structural uptrend, bitcoin needs to consistently break through key resistance levels at around $72,000 and $78,000.

Bitcoin BTC$68,524.42 rebounded near $69,000 on Wednesday, gaining over 10% from Tuesday’s low as the cryptocurrency markets experienced a widespread relief rally following an extended period of negativity.

Ethereum’s ether (ETH), DOGE$0.1033, the native tokens of Solana (SOL) and ADA$0.3050 all recorded double-digit increases, continuing a trend that caught many traders off guard.

Digital asset stocks, which had suffered declines in recent months due to falling cryptocurrency prices, also participated in the relief rally. Stablecoin issuer Circle (CRCL) soared 34% following its earnings report, while crypto exchange Coinbase (COIN) rose 14%. Strategy (MSTR), recognized as the largest corporate bitcoin holder, increased by 9%, and the ether treasury firm BitMine saw an advance of 12%.

The widespread rally provided a much-needed break after weeks of relentless selling and concerns about a further downturn.

Nevertheless, analysts warned that despite the significant bounce in various tokens and equities, the crypto markets still face challenges, with critical resistance levels and macroeconomic risks on the horizon.

Although there was no immediate catalyst behind Wednesday’s movement, extreme fear and bearish sentiment in the crypto markets created conditions conducive to a sharp countertrend rally, as noted by Joel Kruger, market strategist at LMAX Group.

"Crypto assets have been significantly pressured in recent months and were due for a technical rebound," he stated. "The market had developed a substantial tactical short bias, making it susceptible to sharp squeezes on limited news."

However, Kruger advised against labeling the rebound as the beginning of a long-term uptrend just yet.

"Given the sudden nature of the rally and the lack of a distinct trigger — especially in the context of thinner liquidity conditions — this advance should be approached with caution," he remarked.

Chasing the rally

Joshua Lim, global co-head of markets at FalconX, indicated that there is strong demand for bullish positions on ether in the options market. Specifically, traders are purchasing call options and call spreads in the $2,000–$2,200 range for the next two to three weeks, aiming to capitalize on further near-term gains.

Lim noted that some funds are also "pursuing this rally" by moving into higher-volatility altcoins and employing options to enhance potential profits — a sign that risk appetite has rapidly increased following the recent rebound.

Adding to the complexity, approximately 115,000 BTC options valued at $7.49 billion are set to expire on Friday at the end of the month. The so-called "max pain" — the price point where the highest number of options expire worthless — is currently around $75,000, as observed by Wintermute OTC trader Jasper De Maere. This "max pain" level can sometimes serve as a magnet leading into expiry, although dealer positioning appears to be weak, he noted.

"Fundamental indicators still do not convincingly suggest that this strength will continue significantly," De Maere added.

Levels to watch

From a technical perspective, bitcoin encounters considerable resistance in the $70,000 and $72,000 range, where previous rallies have faltered due to seller activity. Surmounting these levels would be the initial hurdle in converting the rebound into a sustainable upward movement.

Bitfinex analysts also highlighted $78,000, where the "True Market Mean," an onchain valuation metric to gauge bitcoin’s fair value based on actual capital flows into the network, is currently located.

This level must be regained on a consistent weekly basis before the structural outlook improves, Bitfinex analysts stated.