Moderate recovery in the cryptocurrency market over the weekend

and broke important psychological levels of $85,000 and $2,000 respectively.

Bitcoin price clocked moderate recovery over the weekend, breaking key psychological levels of $85,000 and sparking renewed interest from institutional investors, according to Monday analysis from QCP Capital.

"The market recovered a bit following a rebound in stock futures, despite persistent recession fears. Statements from Jerome Powell during last week’s FOMC meeting helped to calm investor nerves somewhat. As a result, the crypto market’s fear and greed index rose from 32% to 45% (vs neutral 49%)—suggesting a decrease in overall risk aversion," the report stated.

Chart of Bitcoin price action, from trading view, March 25, 2024

An important positive signal was the significant increase in inflows into spot Bitcoin ETFs. Last week, 8,775 Bitcoins were purchased, which is equivalent to $744 million. This is a sharp reversal after several weeks of net outflows and may indicate the beginning of the return of liquidity to the cryptocurrency market.

"It is also worth noting that the current price rise is being driven by real spot demand, not leverage. This is indicated by the muted volume in open positions for open-ended futures and flat funding rates. This is a key distinction, as usually, leverage-driven moves are quickly followed by sharp drops in liquidation activity," QCP Capital noted.

However, despite renewed ETF momentum and today’s continued rally, the analysts remain cautious about the prospects for a sustained upside breakout. They believe that the upcoming rate hike, which is scheduled for April 2, could put renewed pressure on risk assets.

The options market is also reflecting a more neutral wait-and-see stance, with implied volatility declining and risk-reversals becoming flatter across all expiry dates, in stark contrast to the steeper biases seen just a week ago.

In its report, QCP Capital analyzes the current market situation in detail and suggests a cautious approach to trading. The firm recommends watching closely to see if this week’s recovery repeats the price dynamics of last Monday, when cryptocurrencies rallied on Sunday but pulled back sharply over the next 48 hours.

For traders considering option strategies in the current environment, QCP offers the following approaches:

In a "bullish camp" scenario, traders could sell put options to generate income in a low-volatility market.

In a "bearish camp" scenario, traders could sell covered call options to limit potential upside while collecting premium.

Overall, QCP Capital believes that the cryptocurrency market is presenting interesting opportunities for traders who can adapt to the evolving macroeconomic landscape and emerging institutional activity in the crypto space. However, the firm cautions that traders should approach the market with a balanced perspective and consider both the short-term risks and long-term potential.