Bitcoin Recovers 7% From Weekend Lows as Crypto Markets Face Continued Volatility
Bitcoin has staged a modest recovery during Monday trading, climbing back towards $79,000 after dropping below $75,000 over the weekend. The leading cryptocurrency by market capitalisation now sits at approximately $78,700, representing a 2% gain over the previous 24 hours and a 7% bounce from weekend lows. However, BTC remains more than 10% lower compared to levels seen one week prior.
Ethereum has followed a similar trajectory, posting 2% gains in the past day whilst remaining down 19% on a weekly basis. The weekend price action marked a significant technical breakdown, with markets breaching short term support levels at an unusual pace, even accounting for typical weekend volatility.
According to Adrian Fritz, chief investment strategist at 21shares, the sharp downturn stemmed primarily from forced deleveraging across derivatives markets. More than $2 billion in cryptocurrency derivatives positions were liquidated in rapid succession, creating cascading downward pressure. Fritz noted that liquidations in perpetual futures contracts accelerated the decline, rather than discretionary selling in spot markets driving the movement.
Traditional equity markets presented a contrasting picture on Monday, with major US indices posting gains. The Nasdaq Composite and S&P 500 each advanced 0.6%, whilst the Dow Jones Industrial Average climbed 0.9%. The divergence highlights ongoing weakness specific to digital asset markets.
Bitcoin concluded January with its fourth consecutive monthly decline, extending a losing streak that has weighed on the broader cryptocurrency ecosystem. Meanwhile, precious metals experienced heightened volatility following their steepest single day decline since 1980 on Friday, though gold and silver recovered slightly during Monday trading.
The tentative recovery in cryptocurrency prices has not translated into relief for publicly traded companies with digital asset exposure. Robinhood shares fell 9%, Circle declined 5%, whilst both Coinbase and Strategy retreated 3%. The persistent weakness in crypto related equities suggests investor caution extends beyond spot market movements.
US manufacturing data released Monday exceeded expectations, with the ISM manufacturing PMI registering 52.6 for January against forecasts of 48.5. The reading marks the first expansion in factory activity in twelve months and the strongest figure since 2022. However, January typically sees elevated PMI readings due to post holiday reordering patterns, a seasonal effect observed in both 2024 and 2025.
Market participants now await Friday's January employment report from the United States, which may provide insight into the Federal Reserve's monetary policy trajectory. The central bank paused interest rate cuts at its January meeting last week, leaving investors to assess whether economic data will support resumed easing later in 2025.
Industry impact and market implications
The $2 billion liquidation event underscores persistent leverage in cryptocurrency derivatives markets despite recent price weakness. When overleveraged positions unwind rapidly, the resulting forced selling creates volatility that extends beyond initial price movements, potentially triggering further liquidations in a cascading effect.
The disconnect between recovering traditional equity indices and continued pressure on crypto related stocks suggests institutional investors remain cautious about digital asset exposure. Companies such as Coinbase, which derive revenue from trading volumes and crypto asset valuations, face headwinds when market conditions deteriorate. Similarly, firms holding significant bitcoin on their balance sheets, like Strategy, see their equity valuations tied to cryptocurrency price movements.
The strong manufacturing data complicates the outlook for Federal Reserve policy. Robust economic indicators may reduce urgency for rate cuts, which could limit potential tailwinds for risk assets including cryptocurrencies. Historically, digital assets have shown sensitivity to monetary policy expectations, with easier conditions generally supporting prices.
Technical breakdown of support levels creates uncertainty about near term price direction. Traders often view breaches of established support as signals for further downside, particularly when accompanied by high volume liquidations. Recovery will likely require sustained buying pressure to re-establish confidence and overcome technical damage from the weekend selloff.
The continued drawdown in bitcoin, now spanning four months, represents an unusual period of weakness for the asset. Extended declines can shift market sentiment from short term caution to broader concerns about demand fundamentals, affecting everything from mining economics to institutional allocation decisions.
