Bitcoin and Ethereum traders are adopting a cautious approach after recent market turbulence eliminated nearly $20 billion in leveraged positions over the weekend, significantly impacting investor confidence and risk appetite across digital asset markets.
Market sentiment has gradually transitioned from panic to cautious optimism as both U.S. and Chinese authorities moderated their trade rhetoric, temporarily easing concerns about escalating trade tensions.
Bitcoin (BTC) gained 1.3% over 24 hours to reach approximately $113,000, while Ethereum (ETH) stabilized near $4,100 after briefly surpassing $4,200 overnight. Solana (SOL) advanced 2.9% to $201.8, XRP increased 2%, and Dogecoin (DOGE) rose 2.3% to $0.20. Overall market capitalization now stands at $3.9 trillion—remaining 6% below pre-crash levels but showing a 4.4% recovery from Sunday's lows according to market data.
The Crypto Fear and Greed Index improved to 38 from Sunday's extreme low of 24, indicating traders are gradually re-entering positions. Alex Kuptsikevich of FxPro characterized Friday's market collapse as "an emotional flush" that eliminated vulnerable positions across trading platforms.
"The initial sell-off responded to tariff announcements but accelerated into a cascade of forced liquidations. Such comprehensive market moves frequently indicate short-term bottoms, though market recovery typically requires time," he explained in correspondence with CoinDesk.
Historical patterns reveal similar market dynamics. Previous leverage resets in 2020, 2021, and 2024 preceded sustained recoveries, while the 2022 downturn required several months for full confidence restoration—a timeline current market participants are carefully evaluating.
Recent developments provided additional market support. China's Ministry of Commerce clarified that rare-earth export restrictions wouldn't constitute blanket bans, while former President Trump emphasized cooperative rather than confrontational trade approaches.
Polymarket prediction markets now indicate only 15% probability of full tariff implementation by November 1, significantly reduced from 26% at Friday's close.
This sentiment shift alleviated pressure across risk assets. U.S. equities recovered portions of Friday's declines, with cryptocurrency markets continuing their recent pattern of tracking broader macroeconomic sentiment rather than operating independently.
The Kobeissi Letter characterized the downturn as "technical rather than structural," attributing it to cascading margin calls rather than fundamental portfolio repositioning.
Analyst Frank Fetter noted cryptocurrency markets "maintain distance from overbought conditions," suggesting potential for relief rallies provided volatility remains contained.