Today’s crypto prices seem to be on the mend, alleviating some of the pressure that had burdened the market through late December.
Summary
- The crypto markets kicked off the new year with a more positive sentiment as trading resumed post-holidays and risk appetite stabilized.
- Derivatives data indicates a decrease in leverage and liquidations, implying that traders are adjusting their positions instead of chasing short-term gains.
- Analysts point to the stabilization of ETF flows and buying activity after tax season as primary factors.
The total market capitalization in crypto rose by 1.2% to $3.08 trillion on January 2. Bitcoin was trading at $88,678 at the time of reporting, up 1.3% over the last 24 hours, as its price action stayed within a constructive range.
Altcoins experienced even more significant movements. Leading the resurgence, Cardano rose by 6.3% to $0.3553, Sui increased by 4.5% to $1.46, and Pepe surged by 21% to $0.0548, reassessing market interest.
The overall market sentiment also showed signs of improvement. The Crypto Fear & Greed Index climbed eight points to 28, shifting from extreme fear into the fear zone. This suggests a reduction in selling pressure since late December, though caution remains advisable.
According to CoinGlass data, the derivatives market is seeing a cooling trend in leverage. Open interest dipped by 3.29% to $128 billion, indicating lowered speculative positioning, while 24-hour liquidations dropped by 46% to $126 million. The average relative strength index for the cryptocurrency market stood at 56, suggesting neutral momentum.
January optimism returns, but volatility risks remain
The market rebound coincides with traders re-entering risk assets following the thin liquidity of the holiday season. Historically, January has delivered stronger performance for both crypto and equities, a trend often dubbed the “January effect.”
Firstly, post-tax-loss harvesting flows are making their way back to the market. Analysts observe that the aggressive selling into year-end, particularly from U.S. investors, typically reverses in early January as portfolios get adjusted. Bitwise analysts described the late 2025 dip as “mechanical rather than fundamental,” arguing that forced selling caused temporary mispricing.
Secondly, ETF flows have begun to stabilize. Spot Bitcoin and Ethereum ETFs experienced minor outflows in mid-December, but those trends have slowed, with late December and early January showing significantly lighter redemptions.
Coinbase Institutional reported that many allocators opted to hold steady rather than completely exit, choosing to await clearer macroeconomic signals before increasing their exposure again.
Simultaneously, sentiment has improved as broader macro pressures have eased. With no new geopolitical upheavals and rising expectations for U.S. rate cuts later in 2026, risk appetite is cautiously returning.
Short-term outlook and analyst views
Analysts project Bitcoin to consolidate between $85,000 and $93,000, with a potential dip towards $84,000–$87,000 should liquidity tighten again.
If Bitcoin can maintain above $90,000, it may aim for $100,000–$105,000 later in January, especially if ETF inflows increase and the macro conditions improve further. A breakthrough above that level could signal a significant momentum re-establishment in the market.
Experts from Grayscale, Bitwise, Coinbase Institutional, and Galaxy Research express optimism for 2026. They regard the late 2025 correction, where Bitcoin ended the year roughly 6% lower, as a passing reset rather than a fundamental reversal of the larger bullish trend.
