Bitcoin Reclaims $70K After $8.7B Capitulation But Fear Still Dominates

Bitcoin has clawed back above $70,000 after a steep sell-off earlier this month that briefly pushed prices near $60,000, marking one of the sharpest short-term corrections of the cycle. The rebound follows softer-than-expected U.S. inflation data and renewed rate-cut expectations but market sentiment suggests the recovery remains fragile.

The world’s largest cryptocurrency is up roughly 5% over the past 24 hours, while the broader CoinDesk 20 gained more than 6% in the same period. The bounce comes after $8.7 billion in realized Bitcoin losses over the past week a liquidation wave analysts describe as a potential event.

Cooler Inflation Revives Risk Appetite

The catalyst for Bitcoin’s rebound was January’s U.S. Consumer Price Index (CPI), which rose 2.4% year-over-year slightly below the 2.5% forecast.

The data strengthened expectations that the Federal Reserve could begin easing policy sooner than previously anticipated. Lower interest rates tend to boost demand for risk assets, including equities and cryptocurrencies, by reducing the relative attractiveness of fixed-income yields.

On prediction market Kalshi, traders now price a 26% probability of a 25 basis-point rate cut in April, up from 19% earlier in the week. On Polymarket, the odds climbed from 13% to 20%.

The shift in rate expectations helped lift both equities and crypto markets but beneath the rally lies a more cautious narrative.

$8.7 Billion in Losses Signals Capitulation

According to asset manager Bitwise, Bitcoin investors realized $8.7 billion in losses over the past week. That figure ranks as the second-largest wave of realized losses since the 2022 bear market, trailing only the fallout from the Three Arrows Capital (3AC) collapse.

Such large-scale realized losses often indicate capitulation a phase where weaker hands exit positions en masse, transferring supply to longer-term holders.

“Rotation of supply from weaker hands to conviction investors has historically been associated with market stabilisation phases,” Bitwise noted, though the firm cautioned that redistribution takes time to fully unfold.

If history holds, this wave of selling could lay the groundwork for structural stabilization. But timing remains uncertain.

Fear Still Anchors the Market

Despite Bitcoin’s recovery, the Crypto Fear & Greed Index continues to register “extreme fear,” a level not seen since the 2022 collapse of FTX.

The index has remained in extreme fear territory since the beginning of the month highlighting persistent anxiety among traders.

Bitwise research analyst Danny Nelson summarized the current mood bluntly: the market’s “main driver right now is fear. Fear that we’ll go lower.”

That dynamic creates a self-reinforcing pattern: short-term rallies are viewed as exit opportunities rather than conviction entries, limiting sustained upside momentum.

Treasury Firms Under Pressure

Adding to the volatility, Bitcoin treasury firms publicly listed companies holding BTC on their balance sheets were sitting on over $21 billion in unrealized losses during the downturn, an all-time high.

Following the recovery, that figure has declined to approximately $16.9 billion. While the reduction eases balance sheet stress, the episode underscores how corporate BTC exposure amplifies systemic pressure during sharp drawdowns.

This balance sheet sensitivity adds a new structural layer to Bitcoin cycles compared to prior years, when institutional treasury adoption was more limited.

Thin Liquidity, Weekend Volatility

Market participants also point to thinner weekend liquidity as a contributing factor to the rebound. Lower trading volumes can exaggerate price movements, particularly after aggressive selling phases.

Seller exhaustion following $8.7 billion in realized losses may have provided the fuel for the bounce. However, sustained recovery will likely require renewed spot demand rather than technical relief rallies.

Structural Reset or Temporary Relief?

Strategically, the recent drawdown reflects a broader tension within the market.

On one hand, softer inflation and rising rate-cut probabilities improve the macro backdrop for risk assets. On the other, extreme fear readings and persistent profit-taking suggest investors remain defensive.

The key question now:
Is this capitulation-driven reset the foundation for the next leg higher or merely a pause before deeper correction?

Historically, large realized-loss events have coincided with local bottoms. Yet macro uncertainty, liquidity conditions, and regulatory developments will determine whether Bitcoin can sustain levels above $70,000.

For now, the recovery signals resilience but conviction remains thin.