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 a stock market rebound, with the Dow Jones jumping to $50,000 for the first time. 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 for the rally is that investors began buying the dip following the plunge. Additionally, most oscillators, including the Relative Strength Index (RSI) and the Stochastic oscillator for Bitcoin and other altcoins, have crashed to extreme oversold levels.
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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 in which a falling asset briefly rallies before resuming its downward trend.
There are a few reasons to exercise caution about the rebound. First, the rebound happened as crypto market volatility surged to its 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 their short- and long-term moving averages. A full crypto bull run will be confirmed once 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 this attack will occur soon, a move that could trigger 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 begin after the attack, as the price has already been priced in.
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