The crypto market stabilized on Wednesday, with Bitcoin price rising to $93,000 and the valuation of other tokens rising by over 1% to $3.17 trillion. Some of the top gainers were coins like Starknet (STRK), SPX6900 (SPX), MYX Finance (MYX), and Aster.
Crypto Market is Going Up as Investors Buy the Dip
The main reason why Bitcoin and other cryptocurrencies are rising is that investors are simply buying the dip after the recent crash. It is common for crypto traders to buy assets when their prices plunge.
In some cases, buying this dip has proven to be highly profitable, such as those investors who bought Bitcoin at its lowest level in April last year. They bought Bitcoin at below $80,000, and saw it surge to a record high of $126,300 earlier this year.
However, in some cases, such rebounds have turned into dead-cat bounces. A dead-cat bounce is a situation where an asset in a freefall rebounds temporarily and then resumes the downtrend.
One way of avoiding being caught up in a dead-cat bounce or a bull trap is patience. Instead of timing the market, analysts recommend waiting for top tokens lke Bitcoin and Ethereum to move above key moving averages before opening a position.
READ MORE: Ethereum Price Has Crashed: Top Reasons ETH Will Rebound
Falling Liquidations in the Cryptocurrency Market
The other key reason why the crypto market is going up is that liquidations are falling and futures open interest is rising. Data by CoinGlass shows that open interest in the futures market rose by 1.10% in the last 24 hour to $140 billion. Soaring open interest is a sign that investors are embracing the use of leverage in the crypto industry, which is a good thing for prices.
At the same time, the 24-hour liquidations dropped by 63% in the last 24 hours to $337 million. This is a big decline as the open interest jumped to over $1.5 billion on Monday and Tuesday as most tokens dropped.
Falling liquidations is a positive thing because it is a sign that exchanges are not forcing selling as much as they did recently. In most cases, cryptocurrencies do well when liquidations of bulls are dropping.
Bitcoin Price Rebound
The other main reason behind the current crypto market rally is that Bitcoin has rebounded in the past two days. It initially crashed to a multi-month low of $88,900, and then rebounded to over $93,000. In most cases, cryptocurrency prices do well when Bitcoin is rising.
Finally, the crypto market rally is happening as the Crypto Fear and Greed Index remain in the extreme fear zone. In most cases, crypto bull runs start when there is extreme fear in the market.
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