Bitcoin above 87K: Sustainable recovery or a stop before volatility?

27 Mart 2025

Written by: Rania Gule, Senior Market Analyst at XS.com – MENA

Bitcoin continues its recovery from its 2025 low of $77,000, breaking through the key resistance of its 200-day moving average and reaching $88.7K, marking a three-week high. Today, the price remains stable above $87K, reflecting a clear market rebound after a sharp decline. In my view, this upward movement signals a shift in investor sentiment, driven by several fundamental and technical factors that increase the likelihood of this bullish trend continuing in the short term.

The recovery is not limited to Bitcoin alone; the entire cryptocurrency market has experienced a significant rebound. The total market capitalisation has surged from $2.35 trillion on March 10 to $2.85 trillion today, reflecting a massive $400 billion increase. In my opinion, this rise indicates a return of confidence in the market, with capital flowing back in after a phase of risk aversion. Investors are increasingly recognizing Bitcoin as an asset capable of delivering high returns despite its volatility.

Another supporting factor for this rally is the continuation of positive inflows into spot Bitcoin ETFs for the seventh consecutive day, signalling growing institutional demand. Open interest in Bitcoin futures has also increased, reinforcing the strength of the uptrend. Meanwhile, major corporations are expanding their Bitcoin holdings—MicroStrategy’s reserves have surpassed half a million BTC, and GameStop has announced plans to invest in Bitcoin, highlighting a rising interest from publicly traded companies in the crypto market.

In my opinion, this rally aligns with a strong performance in U.S. equities, as the Nasdaq 100 index has gained 2.75% this week, benefiting from a rebound in tech stocks from their five-month lows. The strong correlation between Bitcoin and the Nasdaq remains intact, with many investors treating Bitcoin as a speculative asset influenced by the same factors driving tech stocks, including monetary policy and overall economic conditions.

On another note, market optimism is partly driven by expectations that Trump’s upcoming U.S. tariff announcements may be less severe than initially feared. This optimism has positively influenced investor sentiment, especially after the Federal Reserve’s latest meeting, where the central bank reaffirmed its commitment to cutting interest rates twice this year, enhancing the appeal of risk assets. However, this optimism could be short-lived if economic and political developments unfold differently than expected.

Despite the positive indicators, I believe caution is still warranted. The macroeconomic environment remains uncertain, and market liquidity is relatively weak, making the recovery fragile. Even if Trump’s tariffs are less aggressive than anticipated, the risk of escalating trade conflicts persists, which could negatively impact financial markets and Bitcoin. Additionally, inflationary pressures remain a concern, especially after the Federal Reserve raised its inflation forecast for the year, potentially influencing investors’ decisions on high-risk assets.

Another warning sign that deserves attention is the decline in Bitcoin’s funding rate to negative territory this week, despite a 4% price increase. To me, this indicates that traders are willing to pay interest to maintain short positions, signalling lingering hesitation and uncertainty about the sustainability of the uptrend. This drop in funding rates could be an early indicator of a potential downside correction if buying momentum weakens.

Investors are now closely watching the so-called “Liberation Day” on April 2, when President Trump is expected to announce his tariff plans. This event could be a major turning point for markets. A more aggressive stance than expected might trigger a strong sell-off, while a more flexible approach could provide an additional boost to risk assets like Bitcoin. Volatility is likely to increase in the coming days as this event approaches, making it essential for investors to be prepared for multiple scenarios.

If Trump’s statements are less aggressive, Bitcoin could see further gains, especially if institutional inflows continue. However, if harsher-than-expected policies are announced, Bitcoin could face a sharp decline due to fears of trade policy impacts on the global economy. Continued uncertainty could also lead to profit-taking by investors who benefited from the recent rally.

Given these factors, Bitcoin finds itself at a critical juncture, facing a mix of supportive and challenging elements simultaneously. Despite the current uptrend, a short-term correction cannot be ruled out, particularly with a major political event like “Liberation Day” approaching. Therefore, risk management remains crucial for investors looking to capitalize on market movements without exposing themselves to substantial losses from sudden volatility.

 

Zaid Barem / ymm