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28.01.2025 01:19 PM
Why the Cryptocurrency Market Recovered So Quickly

Despite yesterday's significant panic sell-off in the cryptocurrency market, traders regrouped and managed to recover most of the losses, bringing Bitcoin back up from $98,000 to $104,000. This demonstrates sustained demand from institutional investors, which is also supported by data.

While such large-scale panic sell-offs typically undermine market confidence, the fact that it was primarily related to the fintech sector makes the cryptocurrency market's recovery both justified and expected. This resilience underscores the adaptability of traders.

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Statistics showed that trading volumes surged during the price recovery, reflecting high interest from buyers. Although Bitcoin briefly declined below $98,000, its steady rebound to $103,000 highlights strong buying interest, even at these levels.

For instance, MicroStrategy recently purchased 10,107 BTC for $1.1 billion at an average price of $105,596 per Bitcoin. The company now holds 471,007 BTC, acquired for approximately $30.4 billion at an average price of $64,511 per Bitcoin. MicroStrategy is one of the most prominent companies actively investing in Bitcoin. Their strategy involves not only accumulating cryptocurrency as a financial asset but also leveraging it to strengthen the company's market position. These investments have increased the company's valuation and attracted attention from investors interested in innovative asset management strategies. Such moves are setting a trend for other companies to consider adding cryptocurrencies to their balance sheets. However, the risks associated with Bitcoin's volatility remain significant, and companies must carefully weigh the pros and cons before making such decisions.

Trump also made waves. Data from Arkham revealed that the Trump-affiliated project, World Liberty Financial (#WLFI), purchased $10 million worth of Ethereum yesterday. The project has been actively accumulating ETH recently, particularly as prices declined toward the $3,000 mark. This $10 million purchase indicates that the team views the current market conditions as favorable for large-scale investments. The drop in Ethereum's price around $3,000 has opened the door for significant investments, with increased buying activity from institutional players. This highlights growing interest from institutions that see potential in Ethereum's recovery.

The market also found support in statements made by Senator Cynthia Lummis, who introduced a bill in Congress advocating for the establishment of a U.S. cryptocurrency reserve. She encouraged citizens to buy and hold BTC as a retirement and future savings asset. Lummis emphasized the importance of diversifying retirement portfolios and the potential benefits of investing in Bitcoin. According to her, a U.S. cryptocurrency reserve could not only stabilize the financial system but also provide citizens with a reliable savings tool."Bitcoin is not just a stock or a security—it is an asset capable of preserving and growing your wealth over decades," Lummis stated.

The proposed bill envisions the creation of a special fund that maintains returns comparable to traditional investment instruments. This could attract new investors confident in the sustainability and safety of cryptocurrency. Lummis also called for greater support for financial innovation, arguing that it would help the U.S. maintain its global leadership.

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Bitcoin buyers are currently targeting a return to the $103,000 level, which would pave the way to $104,400 and eventually $105,900. The ultimate target is $107,400, surpassing which would signal a return to a medium-term bull market.In the event of a correction, buyers are expected to step in around $101,250. A break below this level could push BTC down to $99,500, followed by $97,900. The furthest downside target would be $96,400.

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A clear breakout above $3,220 opens the path to $3,264, with $3,314 within reach. The ultimate target is the yearly high of $3,373, surpassing which would signal a return to a medium-term bull market.In the event of a correction, buyers are expected to step in around $3,161. A break below this level could push ETH down to $3,106, followed by $3,056. The furthest downside target would be $2,997.

Jakub Novak,
Analytical expert of InstaForex
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