Why is the crypto market rallying today? (Feb. 25)

The crypto market cap rebounded 2.7% to $2.32 trillion on Wednesday after recovering some of the previous days’ losses as investors bought the dip.

Bitcoin (BTC), the industry’s primary bellwether, climbed 5.5% to hit an intraday peak of $66,233 before consolidating near $65,000, a level now serving as a vital psychological floor. 

Ethereum (ETH) followed suit with a 4% rise, stabilizing around $1,900, while other major assets, including XRP, Tron (TRX), and Dogecoin (DOGE), recorded more modest gains between 1% and 3%. 

Leading the large-cap pack, Solana (SOL) outperformed with a surge of nearly 7% and had successfully reclaimed the $80 threshold at the time of writing.

Crypto prices rebounded amid millions of liquidations across leveraged markets. Data from CoinGlass shows that around $154 million in short positions were liquidated across the futures market. Over the past 24-hour session, nearly $343 million was liquidated from the broader market, with the majority coming from short liquidations. 

When short positions get liquidated, they force the exchange’s liquidation engine to buy back the underlying assets at current market prices to close out the positions, and thus result in an upward short squeeze that accelerates the price recovery.

Crypto market rebounds amid institutional dip buying 

The crypto market recovery was primarily supported by investors buying into the recent dip.

Notably, Bitcoin plunged more than 7.5% yesterday, as it moved closer to the critical $60,000 support level. The move sparked a relief bounce, during which BTC successfully reclaimed the $65,000 threshold. The biggest tailwind for the jump was a surge in institutional buying spearheaded by Michael Saylor’s Strategy, which acquired additional BTC during the pullback.

Another key catalyst fueling the market rally came in the form of the Coinbase Premium becoming positive for the first time in 40 days. A positive reading on this metric means Bitcoin is more expensive on Coinbase than on global exchanges. Such a significant price gap is a classic signal of strong buying pressure from American investors and institutions.

As Bitcoin reclaimed the support that analysts believe is essential to avoid more downside volatility, the positive momentum rippled across the broader market.

Market rebound was supported by tech stocks rally

Crypto prices also rose after several Asian tech stocks rallied. South Korea’s KOSPI Index rose to record highs, signaling a broader risk-on sentiment among investors across global markets.

Major traditional U.S. stock indices, such as the S&P 500 and Russell 2000, also stood higher on the day. Cryptocurrencies often tend to rally when such equity markets show signs of strength and stability.

Meanwhile, the crypto market’s tight correlation with technology stocks remained evident, with software shares (IGV) rebounding nearly 1.7% over the past day after recent losses triggered by fears that generative AI tools could disrupt traditional software business models.

However, these concerns are easing as industry leaders like Intuit and DocuSign announce strategic partnerships with AI firm Anthropic, signaling that established companies may successfully adapt to the technology rather than being displaced by it.

Hopes of de-escalation in U.S. and Iran conflict

Another major catalyst for today’s rally is market hopes of a potential de-escalation of conflict between the U.S. and Iran. Reports cited that Iran’s deputy foreign minister has hinted that the country is looking to take any required step to reach a deal with the U.S., reducing fears of an imminent military conflict.

Earlier last Thursday, U.S. President Donald Trump had threatened to launch an attack within ten days from that time, spooking investors and reducing risk-on appetite.

With the latest positive headlines, investors are likely taking a breather as they await more clarity on the diplomatic front. As the geopolitical tensions eased, traditional safe-haven assets such as gold and crude oil lost the momentum they had been riding on, giving crypto assets the room to regain footing.