A new crypto market rally is happening today, with Bitcoin roaring back above $70,000, and the valuation of all coins spiking by over 8%. Midnight (NIGHT), WorldCoin (WLD), Bitcoin Cash (BCH), Ripple (XRP), and Solana (SOL) jumped by over 15%.
Why the Crypto Market Rally is Happening
The ongoing crypto rally coincided with the rebound in the stock market as the Dow Jones jumped to $50,000 for the first time ever. The tech-heavy Nasdaq 100 and the broader S&P 500 Index pared back some of the losses as investors bought the recent dip. At the same time, the VIX Index plunged by over 20% on Friday.
The crypto market rally happened as the Fear and Greed Index rebounded from the extreme fear zone of 4 to the current 8. In most cases, crypto bull runs start when this gauge nears the oversold level.
Therefore, the main reason behind the rally is that investors started to buy the dip following the plunge. Besides, most oscillators, including the Relative Strength Index (RSI) and the Stochastic of Bitcoin and other altcoins, crashed to their extreme oversold level.
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Is This a Dead Cat Bounce?
The main risk for investors is that this crypto rally could be a dead-cat bounce, commonly known as a bull trap. A bull trap is a situation where a falling asset stages a brief comeback and then resumes the downward trend.
There are a few reasons why the rebound calls for caution. First, the rebound happened as volatility in the crypto market has jumped to the highest level since FTX collapsed in 2022. Data shows that the Bitcoin Volmmex Implied Volatility Index jumped to 98% from 55% on Thursday. This index is created to reflect the market’s expected volatility in the next 30 days.
Second, Bitcoin and most altcoins remain below the short-term and longer-term moving averages. A complete crypto bull run will be confirmed when the prices move above these averages.
Third, a major risk in the form of Donald Trump’s attack on Iran is yet to happen. Analysts and Polymarket traders believe that this attack will happen soon, a move that may lead to a regional war and higher oil prices.
Such an attack would also lead to lower crypto prices because Bitcoin’s role as a safe-haven asset has been questioned. However, as we wrote recently, the crypto rally may start after the attack happens, as it has already been priced in.
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