Bitcoin rebounds strongly back above $90,000, so why does market sentiment remain on edge?

After a nearly brutal sell-off, Bitcoin staged a dramatic comeback this Tuesday, with prices surging back above $90,000 and an intraday gain of up to 6.8%. This rebound was driven by multiple positive factors, including upbeat comments from the US Securities and Exchange Commission (SEC) chair and asset management giant Vanguard opening up cryptocurrency fund trading. However, the market hasn’t truly warmed up: Bitcoin’s funding rates have turned negative, and the Fear & Greed Index indicates “extreme fear”—all signaling investors’ fragile confidence. Meanwhile, Trump-themed tokens collapsed during the crash, becoming one of the hardest-hit sectors in this market purge. This article will conduct an in-depth analysis of the drivers behind this rebound and the hidden risk signals in the market.

Strong Rebound: Multiple Tailwinds Converge, Market Finds Hope in Desperation

This Tuesday, the crypto market saw a long-awaited strong rebound. Bitcoin prices soared over 6% in a short period, peaking at $92,323 and successfully reclaiming the critical $90,000 psychological level. This rebound seemed like a shot in the arm for a market mired in months of stagnation. Meanwhile, Ethereum also gained more than 8%, briefly returning above $3,000. Mid- and small-cap tokens like Cardano (ADA), Solana (SOL), and Chainlink (LINK) recorded double-digit gains, suggesting decent market breadth.

The rebound was not triggered by a single event but by a combination of positive signals. First, remarks from SEC Chair Paul Atkins about creating “innovation exemptions” for digital asset firms were interpreted as a potential regulatory thaw. More importantly, global top asset manager Vanguard announced on Monday that it would allow ETFs and mutual funds heavily invested in cryptocurrencies to trade on its platform. This move is seen as a significant sign of mainstream financial institutions’ increasing acceptance of the crypto asset class, greatly boosting institutional investor confidence.

Wintermute trading strategist Jasper De Maere commented: “This appears to be driven by industry-specific headlines, along with crypto catching up to broader market gains, fueling this strong price action.” Market analysts believe the sustained decline has already liquidated a large number of leveraged positions, and the market is now transitioning from a “liquidation mode” back to a “cautious risk-taking mode,” providing a relatively solid foundation for the rebound.

Lingering Concerns: Funding Rates Turn Negative, Market Foundation Remains Fragile

Despite the impressive price action, several market observers note that various on-chain and derivatives data suggest this recovery may not be smooth, and the market’s vulnerability hasn’t been eradicated by a single-day rebound. A key bearish indicator: according to CryptoQuant data, Bitcoin’s perpetual contract funding rates have recently turned negative. This means that in the futures market, demand for short positions exceeds that for longs, with traders willing to pay fees to hold short bets—indicating that market sentiment remains cautious or even pessimistic.

Additionally, data from major CEXes show that balances of stablecoins like USDT and USDC are climbing. Bitfinex analysts note this indicates traders are “parking” capital rather than aggressively buying the dip. This behavior typically emerges in late-stage corrections: investors hedge risk by moving into stablecoins until macro uncertainty clears or ETF inflows stabilize. Notably, this “liquidity on the sidelines” differs from the “liquidity exhaustion” seen at long-term market tops; it means there’s still plenty of “ammo” waiting for the right entry opportunity.

Chris Kim, CEO of quantitative asset management protocol Axis, said bluntly: “The overall sentiment is cautious. Native crypto traders are feeling nervous.” He further added that institutional investors also seem to be waiting for next week’s Fed rate decision before deciding whether to increase risk exposure. This widespread wait-and-see attitude has limited the rebound’s sustainability and magnitude.

Market Fragility Key Data Overview

Bitcoin Drawdown from Highs: Down nearly 30% since hitting all-time highs in early October

Recent Total Leverage Liquidations: About $19 billion

Current Fear & Greed Index Status: “Extreme Fear” (ongoing for about three weeks)

Bitcoin Perpetual Contract Funding Rate: Turned negative

Stablecoin (USDT, USDC) Exchange Balance Trend: Significantly rising

Sector Rotation: Trump-Themed Tokens Suffer Bloodbath, Become Market “Disaster Zone”

During this round of wild market swings, one sector’s disastrous performance stood out—crypto assets related to former President Donald Trump and his family. These assets suffered losses far exceeding the broader market during the sell-off, highlighting the enormous risks of meme coins and celebrity-themed tokens in downtrending markets. American Bitcoin Corp.—a crypto mining firm co-founded by Eric Trump—had its stock price halved in less than 30 minutes on Tuesday, plunging over 51% with multiple trading halts amid extreme volatility.

In the crypto space, Trump-themed tokens also took heavy losses. The official meme coin TRUMP has plummeted from its January launch high of about $73.40 to around $6. The Trump-related DeFi platform World Liberty Financial’s token WLFI has dropped about 30% from its September high. Even First Lady Melania Trump’s meme coin MELANIA now trades at just 13 cents—virtually zero compared to its January peak. This series of crashes clearly shows that when risk appetite evaporates, narrative-driven assets lacking fundamental support are the first to get hit.

Deep Dive: How to Interpret the Divergence Between Funding Rates and Stablecoin Balances?

The current market presents an interesting phenomenon: on one hand, prices are rebounding strongly; on the other, negative funding rates and rising stablecoin balances reflect caution. How should we interpret this divergence? Experienced traders typically see this combo as characteristic of a “hesitant rebound” phase. Negative funding rates suggest pro traders and speculative capital aren’t bullish on what’s next—they’re using the rebound to build or maintain short hedges. The increase in stablecoin balances reflects broader investor behavior—after selling, they don’t exit the market but convert to stablecoins and wait for the next opportunity.

Historically, this kind of divergence can persist for a while, until a clearer macro shift (such as a Fed rate cut) or a major industry breakthrough (like a large institution making a massive allocation) finally turns market sentiment around. Bloomberg strategist Brendan Fagan notes that the current combination of “flushed-out positions” and “growing institutional infrastructure” does provide a firmer footing than in previous weeks, but the fundamental outlook remains uneven. Therefore, investors should closely watch for a fundamental shift in on-chain sentiment indicators, rather than just focusing on price rebounds.

Bitcoin’s return to the $90,000 level undoubtedly brings a glimmer of hope to a gloomy market, but cautious positioning in the derivatives market and the ever-growing stablecoin “reservoir” remind us that rebuilding confidence is far more complex and lengthy than a price rebound. The market is digesting macro policy uncertainty and reassessing the true value of every project. Whether this multi-factor-driven rally marks the start of a new cycle or is merely a technical bounce in an ongoing downtrend remains to be seen—the answer may lie in next week’s Fed meeting and the eventual direction of all that stablecoin liquidity still waiting on the sidelines.