Bitcoin and top altcoins like Pepe Coin, Solana, and XRP prices staged a strong comeback on Tuesday, erasing most of the losses made a day earlier.
Bitcoin (BTC) soared by 6.5%, while Pepe Coin (PEPE), Solana (SOL), and Ripple (XRP) jumped by over 15%. Other top gainers included tokens such as Pudgy Penguins, SPX6900, and Sui.
Market Sentiment and Investor Behavior
Altcoins rose as investors embraced a risk-on sentiment in the financial market. The Dow Jones, S&P 500, and Nasdaq 100 indices rose by over 0.78%, while the VIX Index dropped by 4.50%. A drop in VIX is a sign of falling volatility in the market.
The rebound happened as investors bought the recent dip and embraced a risk-on sentiment.
Altcoins also rebounded as investors cheered the decision by Vanguard to start offering crypto services. This is important as Vanguard has millions of customers and over $10.4 trillion in assets under management. As such, there is a likelihood that these coins will see more demand in the near term.
Regulatory Outlook and Innovation
Meanwhile, Paul Atkins, the head of the Securities and Exchange Commission, sounded optimistic about the crypto industry. He hinted that the agency will launch an innovation exemption for the industry, which will start in January. This plan will help the industry innovate without worrying about tough regulations.
Under Atkins, the SEC has embraced a light-touch approach to regulations. He ended most lawsuits brought by Gary Gensler, including those against companies like Ripple Labs, Uniswap, and Coinbase. He has also approved several altcoin ETFs, including on top altcoins like Dogecoin, XRP, Solana, and Hedera Hashgraph.
Futures Market Activity
Bitcoin and altcoins also rebounded as futures open interest in the crypto industry rose, a sign that investors are deploying leverage, which normally leads to more demand.
Solana’s futures open interest rose to $7.2 billion on Tuesday from $6.8 billion a day earlier. Similarly, XRP’s open interest rose to $3.6 billion, while Pepe’s metric jumped to over $300 million.
Potential Risks and Market Warnings
Still, as we warned here, there is a likelihood that the ongoing crypto recovery is a dead-cat bounce or a bull trap. A dead-cat bounce is normally a temporary rebound that happens during a bear market. This means that there is still a chance that these gains will be undone soon.