Why the Cryptocurrency Market Rose Today... Technical Buying and Sentiment Recovery Led the Rebound

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The cryptocurrency market rebounded, driven by renewed buying interest from key support levels and a short squeeze, but whether it can break past the $2.23 trillion resistance level has emerged as a watershed for sustained gains. The total market capitalization rose by 0.59% over 24 hours to $2.2 trillion, with a 72% correlation with gold, reflecting a common demand for inflation-hedge assets.

According to the cryptocurrency market aggregator CoinMarketCap on August 6 (local time), the primary reason for the market rebound is that the total market capitalization secured support at the $2.2 trillion level, which is the 50% Fibonacci retracement zone. The social media net sentiment index also improved to 5.06, indicating weak optimism, and as positive outlooks for Bitcoin (BTC) and Ethereum (ETH) spread, investor sentiment shifted from fear to cautious optimism.

In the derivatives market, a small short squeeze (buying pressure occurring to liquidate or cover short positions) amplified the gains. Total open interest increased by 3.84% to $397 billion, while funding rates dropped by 58.69% despite maintaining positive territory. This indicates an increase in new long positions without excessive leverage. Bitcoin liquidations over 24 hours amounted to $35.68 million, with short positions accounting for over 80% of this.

The fact that institutional funds did not rapidly exit also supported the market's bottom. Assets under management (AUM) for Bitcoin spot ETFs remained stable at $77.72 billion, and Ethereum spot ETFs at $13.76 billion. With ETF asset sizes maintained, technical buying combined with derivatives liquidations are interpreted as having laid the foundation for a short-term rebound.

The short-term outlook is close to cautious optimism. If the total market capitalization maintains the support zone of $2.15 trillion to $2.2 trillion, there is a possibility of testing the 23.6% Fibonacci retracement line at $2.23 trillion. Particularly, if it breaks below the 78.6% Fibonacci zone of $2.17 trillion, the bullish structure could be invalidated, and downward pressure might increase again. Future progress in US cryptocurrency market structure bills and the Clarity Act could serve as additional upward catalysts, but liquidity concerns due to a decrease in Tether (USDT) supply are considered variables that could limit the rebound.

*Disclaimer: This article is for investment reference only, and we are not responsible for any investment losses based on it. The content should be interpreted for informational purposes only.*