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Bitcoin Is Back, But Is It Setting Up For A Crash?

Coin WorldWednesday, Apr 23, 2025 7:30 am ET

1min read

With Trump stating that he has no intention of firing Federal Reserve Chairman Powell, which alleviates concerns about the Fed's independence, and claiming he would significantly reduce tariffs on Chinese goods, market fears over the trade war calmed and optimism regarding the Federal Reserve and US-China trade relations starts spreading in the market.

Therefore, Bitcoin shortly stood above $94,000 on Wednesday, marking a 24-hour increase of 6.53%. The CoinDesk 20 Index, which measures the cryptocurrency market, rose by 10.4% over the past 24 hours.

Analysts from hedge fund QCP Capital noted that as capital shifts toward safe-haven assets and inflation hedges, Bitcoin and gold have proven to be the primary beneficiaries of dollar risk outflows.

Just a day earlier, Bitcoin broke through the $90,000 mark, signaling its departure from a long-standing trend of moving in tandem with US stock markets. However, shortly afterward, following Trump's conciliatory remarks, the asset once again moved in sync with US stocks and the dollar, while gold prices fell rapidly.

Bitcoin's earlier rise was linked to significant inflows into Bitcoin ETFs on Tuesday. On that day, Bitcoin ETFs attracted a total of $936 million, marking the third-highest daily inflow this year.

Additionally, reports emerged that crypto company Tether, US financial services firm Cantor Fitzgerald, and Japan's SoftBank Group were discussing the formation of a $3 billion investment vehicle to invest in cryptocurrencies.

These factors laid the foundation for Bitcoin's price surge earlier this week, but some professionals believe the rally may not be sustainable.

Stefan von Haenisch, OTC Trading Director for Asia-Pacific at cryptocurrency custody firm BitGo, suggested that the cryptocurrency rally could enter a pullback phase by the weekend. He suggests the market has been rising continuously, and it feels a bit overbought. In such a scenario, a correction to $88,000 or even lower for Bitcoin is not out of the question.

Meanwhile, Brazilian crypto asset management firm QR Capital noted in a report that they observed a sharp decline in spot trading volume for cryptocurrencies, with liquidity shifting toward futures markets. This indicates that investors are increasing leverage to take larger positions, reflecting current bullish sentiment.

However, this influx also raises the risk of a significant pullback. If market sentiment suddenly reverses, excessively leveraged positions could trigger a cascade of liquidations.

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