Don't get too excited too soon! Despite Bitcoin rebounding to a two-week high, market sentiment remains fragile and volatility may persist.

In the midst of seeking a recovery from weeks of continued sell-offs in the cryptocurrency market, Bitcoin continued its rebound on Wednesday, rising by 2.5% to $93,900 at one point, reaching its highest level since November 17. At the time of writing, Bitcoin was trading at $93,262, with other major cryptocurrencies like Ethereum also seeing slight gains. However, traders remain cautious and market sentiment remains fragile, with signs of continued pressure in the entire cryptocurrency market. Bitcoin reached a historical high of $126,251 in early October, but since then has experienced a brutal sell-off, resulting in a total market capitalization loss of over $1 trillion in the entire cryptocurrency market. The recent rebound of Bitcoin provided a brief respite from the weeks of sustained losses. Data from Coinglass showed that the latest rebound led to a total of approximately $400 million worth of cryptocurrency short positions in the past 24 hours. Bitcoin had a tumultuous journey this week. On Monday, Phong Le, the CEO of Strategy (MSTR.US), stated that the "whale" company might sell its holdings of cryptocurrencies if it needed to repay debts, which then led to a sharp drop in Bitcoin prices. On Tuesday, Bitcoin rose above $90,000. Traders pointed out that the rebound was driven by news of the U.S. Securities and Exchange Commission (SEC) Chairman Paul Atkins planning to announce "innovation exemptions" for digital asset companies, and Vanguard Group's decision to allow major cryptocurrency-holding ETFs and mutual funds to trade on its platform. Fragile Market Sentiment Meanwhile, traders remain cautious and market sentiment remains fragile, with signs of continued pressure in the entire cryptocurrency market. Sean McNulty, the Head of Derivatives Trading for FalconX Asia Pacific, stated: "We're not seeing a lot of buyers stepping in at these levels. Market sentiment remains fragile." A gauge of cryptocurrency investors' confidence is the 12 Bitcoin spot ETFs listed in the U.S. Data shows that these funds received a $59 million inflow on Tuesday, described by McNulty as "modest." Market observers stated that several indicators suggest that Bitcoin's path to recovery may not be smooth. According to data from CryptoQuant, the Bitcoin funding rate, a key indicator of cryptocurrency market sentiment, has turned negative in the past few days, indicating that the demand for bearish bets in the perpetual futures market outweighs the demand for bullish positions. Another sign of cautious investor sentiment is the increase in stablecoin balances on cryptocurrency exchanges like USDT and USDC, as noted by Bitfinex analysts, indicating that traders are parking funds rather than actively buying the dip. The analyst stated in a report, "This is a typical phenomenon in late-cycle adjustments - investors hedge risks by turning to stablecoins until ETF funds stabilize and macro uncertainty dissipates." "Importantly, this is not behavior seen at long-term market tops - where stablecoin liquidity would dry up. Right now, liquidity is accumulating off-exchange, suggesting spare capital is waiting for clarity." Chris Kim, the CEO of quant asset management protocol Axis, stated that the overall sentiment is cautious. He mentioned that institutional investors seem to be waiting for the Federal Reserve's interest rate decision next week before increasing their risk exposure. Melvin Deng, CEO of QCP Group, stated that Bitcoin's rebound is "actually just a relief rebound." However, he also pointed out that Bitcoin may regain some upward momentum from here, saying that it is a good entry point for those who have not fully deployed. Volatility Will Persist Despite Bitcoin returning above $90,000 after months of drastic volatility, Tom Farley, CEO of Bullish and former President of the New York Stock Exchange, stated that the price volatility of this cryptocurrency will continue to be a source of anxiety for investors. Farley mentioned that while he remains bullish on Bitcoin in the long term - Bullish still holds 24,000 Bitcoins in its portfolio - "volatility is real and that volatility will persist." Farley attributed the recent Bitcoin price fluctuations to changes in Bitcoin buying patterns, particularly highlighting the influence of large institutional buyers like Strategy - which bought 180,000 Bitcoins in the first seven months of last year but significantly reduced purchases in the following months. Farley explained that market dynamics show that about 160,000 Bitcoins are "mined" each year, requiring incremental buyers worth around $15 billion to absorb this new supply, "When marginal buyers leave, the market will see more volatility and downward pressure." He pointed out that the decrease in institutional purchases is one of the reasons for the increased Bitcoin price volatility. Farley also touched on security issues within the cryptocurrency ecosystem, including recent hacker attacks affecting DeFi protocols. Despite these events, Farley noted that significant security vulnerabilities have significantly decreased, "About half a year ago we woke up and now it feels more like an institutional asset class, broadly speaking, centralized exchanges are trusted." While acknowledging that security remains the "number one risk for any cryptocurrency company," Farley remained optimistic about the future of blockchain technology. He predicted, "Over the next few years, we'll see major financial asset classes migrating to publicly available blockchain-related technologies." This prediction reflects his persistent confidence despite inherent market volatility.