Technical data suggests lower support around $34,000 could stabilize the current pullback. 

“Going forward, we expect bitcoin to keep pushing higher and test the upper end of the $30,000-$42,000 trading range,” wrote Pankaj Balani, CEO of Delta Exchange, in an email to CoinDesk. “We expect to see similar moves in altcoins, too, led by ether.”

Cryptocurrencies:

Traditional markets:

“Only a conclusive break above $50,000 in BTC would attract fresh flows and signal a change in the broader direction for the market,” Balani wrote.

Some analysts expect further upside in bitcoin as institutional buyers find value opportunities across cryptocurrencies. 

“As institutional investors have been waiting on the sideline to take positions, the current market move could be sustained during the week” wrote Elie Le Rest, partner at crypto hedge fund Exo Alpha, in an email to CoinDesk.

The short-squeeze rally triggered the most active trading session this quarter in crypto markets, according to data from Skew.

The increase in volumes has been driven by large buyers, typically institutions that have waited for a more directional trend on bitcoin since the end of May, according to Le Rest.

Over 2 million BTC have returned to profitability based on their realized price after bitcoin rallied over the past few days, according to data from Glassnode. 

“This indicates that 11.2% of the circulating supply has an on-chain cost basis between $29K and $38K,” Glassnode tweeted Monday.

Bitcoin’s drawdown, or the percentage decline from the peak near $63,000, narrowed to around 40% over the past week. Typically, drawdowns exceeding 50% indicate the start of a bearish trend, similar to 2014 and 2017-2018. 

The current drawdown suggests bitcoin’s intermediate-term downtrend is stabilizing given the sharp price bounce over the past few days. However, drawdowns can last much longer towards 70%-80%, which previously occurred near bear market troughs.

Bitcoin’s one-month put-call skew, which measures the cost of puts, or bearish bets, relative to calls, or bullish bets, has come off sharply to 2% from 13% late last week, according to data provided by crypto derivatives analytics firm Skew. The one-week put-call skew has declined from 13% to 5%.

The narrowing of the spread between prices for puts and calls essentially means investors are no longer seeking downside hedges in anticipation of an extended price drop, wrote CoinDesk’s Omkar Godbole.

“After Monday’s short squeeze, some unregulated futures are back in a 10% contango, but the basis varies across the various venues, and the institutional traders still seem cautious,” according to a Tuesday report by Arcane Research.

Contango, a term used to describe the bullish arbitrage, occurs when the bitcoin futures price is higher than the spot price. Since April, bitcoin’s contango has narrowed as bullish sentiment waned.

“We’re still far away from the extreme contango of 50% from mid-April, but it is concerning that the traders in the unregulated offshore futures once again outpace the CME traders,” Arcane wrote.

“The growing contango occurs as traders with a short bias are reluctant to re-enter short positions after Monday’s massive short squeeze.”

With largest stablecoin, USDT, in the news again for inauspicious reasons, worried perma-bears might now be searching for the crypto market equivalent of a credit default swap – a derivatives instrument that allows buyers to bet on another trading counterparty’s creditworthiness. 

The answer to that might be a put option on tether, essentially a bet that the stablecoin’s price will fall below its ostensible redemption value of $1. Some traders have been actively scouting around for such a trade, according to some players in digital-asset markets. 

Although market makers have seen demand for a tether put, fulfilling that demand is difficult, wrote CoinDesk’s Omkar Godbole. Currently, there is no active market for put options on tether. Exchanges don’t find a business case there because, technically, there is no exposure to offset. Participants fearing a tether collapse need to find a put seller in over-the-counter (OTC) markets or approach market makers. That’s a costly affair. 

The solution may be dealing in a tether put at a much lower or out-of-the-money strike below $1.00. That would cost relatively less than buying a put at $1.00. 

Most digital assets on CoinDesk 20 ended lower on Tuesday. In fact, everything was in the red except for dollar-linked stablecoins.

Notable losers of 21:00 UTC (4:00 p.m. ET):

aave (AAVE) -11.31%

tezos (XTZ) -9.1%

uniswap (UNI) -8.03%