Investor sentiment in the crypto market recovers as President Trump softens his tariff stance. However, analysts warn about potential liquidity risks over weekends. Despite an 11% recovery in Bitcoin, structural weaknesses could lead to volatility. Experts maintain that while the mood has shifted, caution remains necessary due to thin trading volume and looming tariff negotiations.
The mood among cryptocurrency investors is showing some signs of recovery, mainly due to a shift in tone from US President Donald Trump regarding import tariffs on Chinese goods. He hinted that tariffs could significantly decrease, which has boosted risk appetite across crypto markets. But, experts caution that this uplift in sentiment doesn’t necessarily shield Bitcoin from facing volatility, especially as weekend liquidity conditions are still shaky.
Analysts at Bitfinex have noted that while the current market sentiment appears more stable, structural issues remain. They emphasize that a positive mood can reduce market fragility, but it doesn’t negate risks brought on by thin liquidity over weekends. Historically, weekends have been a time when sharp price movements can occur, particularly when market depth is low, which could trigger significant volatility in response to unexpected economic news.
In the past week, Bitcoin managed to recover nearly 11%. However, this momentum has often been curtailed by Sunday liquidity patterns. For example, on April 6, Bitcoin dropped below $75,000 despite an initial separation from a steep decline in the US stock market earlier in the week. Analysts suggest this slide was worsened by a lack of available liquidity during the weekend, pushing traders toward Bitcoin as a primary asset for de-risking.
Marcin Kazmierczak, co-founder of the RedStone blockchain oracle firm, weighed in on the topic. He acknowledged the improved sentiment but still warned that the crypto markets remain vulnerable to extreme fluctuations during times of reduced trading volumes. While sentiment has firmed up somewhat, traders ought to be cautious as weekend liquidity constraints could still have a drastic impact on prices, irrespective of how the market feels overall.
According to Aurelie Barthere from Nansen, the crypto industry may have absorbed all there is to know regarding tariff worries. She states that it seems investors have just about reached their limit of anxiety surrounding tariffs. The uncertainty about future developments looms, though there appears to be a collective waiting for a cue that indicates a return to a more stable playing field.
Barthere mentioned that whether the recent rally can endure ties back to breaking previous resistance levels. There’s speculation that markets presently perceive a backing, or a ‘Trump put’, under various assets like equities and US dollar. But there’s also a warning that volatility could still arise, especially with negotiations lingering ahead. Nansen once posited a 70% chance that the crypto market would hit a bottom and start recovery by June, stressing that the success of this rebound will hinge on the results of ongoing tariff discussions.
