Decoding the Crypto Rebound: What's Driving Bitcoin and Altcoins Higher Right Now?

The cryptocurrency market is experiencing a notable recovery at the start of 2026, with Bitcoin (BTC) trading around $95.40K and broader market sentiment turning constructively bullish. Yet beneath this rally lies a complex mix of fundamental drivers, technical signals, and potential pitfalls that investors should carefully evaluate. Understanding why is crypto going up requires examining multiple market dimensions simultaneously.

Macro Tailwinds: Why Investors Are Getting Aggressive Again

The current bounce isn’t happening in isolation. Equities are kicking off 2026 with solid momentum—the Hang Seng Index surged 2.70%, while key indices like the Nasdaq 100 and S&P 500 futures are trading in positive territory. Wall Street consensus suggests the S&P 500 could reach $7,500 or higher this year, driven by anticipated Federal Reserve rate cuts, high-profile IPOs (Anthropic, SpaceX, and others), and robust corporate earnings.

This broader risk-on appetite is naturally flowing into risk assets like cryptocurrencies. The January Effect—a historical pattern where investors return to markets after December’s tax-loss harvesting—is also playing a supporting role. When equities move higher, crypto typically follows, especially as institutional capital seeks exposure across alternative asset classes.

Buyer Capitulation or Strategic Accumulation?

One primary catalyst for the current rebound is straightforward: investors are purchasing the dip. Bitcoin remains approximately 30% below its 2025 peak, while Ethereum has retreated roughly 40% from recent highs. After double-digit percentage declines, institutional and retail buyers alike tend to view these levels as attractive entry points.

This dynamic is reflected in derivatives markets. Futures open interest has climbed 2.16% in 24 hours to $130 billion, signaling that traders are re-deploying capital and accepting leverage positions. While this level still trails the historical high of $255 billion from 2025, it represents meaningful momentum recovery after the severe liquidation cascade in October that wiped out over 1.6 million traders simultaneously.

Liquidations have also eased considerably—the latest 24-hour figure dropped 40% to $141 million, with approximately 102,114 traders exiting positions. This reduction in forced selling removes one major headwind and suggests panic has subsided.

Performance Snapshot: Altcoin Momentum Across the Board

Beyond Bitcoin’s recovery, altcoins are displaying mixed signals. Story Network (IP) experienced volatility, while Pepe (PEPE) and major infrastructure tokens including Aerodrome Finance (AERO), Immutable (IMX), Filecoin (FIL), Maple Finance (SYRUP), and Render (RNDR) have shown varying 24-hour performance metrics. This selective strength across different sub-sectors indicates investors are gradually rotating back into riskier positions rather than retreating further.

The aggregate crypto market capitalization has climbed, though total trading volume—hovering around $64 billion—remains 25% below normal levels of $100+ billion. Lower volume during recoveries warrants caution about the durability of gains.

The Dead Cat Bounce Question: Structural Risks Remain

Before celebrating, market participants should acknowledge significant headwinds. The technical picture presents challenges: Bitcoin and major altcoins have formed bearish pennant patterns and are still trading beneath all major moving averages—classical signs of ongoing downtrends. Large players including established institutions have been measured sellers into strength, suggesting they lack conviction in a sustained recovery.

A dead cat bounce—where assets briefly rebound before resuming their decline—remains a credible scenario, particularly given holiday-period illiquidity and reduced trading participation. Resistance levels encountered during previous recovery attempts have consistently turned back buyers, creating a pattern of failed rallies.

Additionally, the January bounce could represent a false breakout, especially if macroeconomic data disappoints or Fed policy signals shift unexpectedly. Traders positioning aggressively on leverage during this window face significant liquidation risk if support levels break convincingly.

The Verdict: Cautious Optimism With Eyes Wide Open

Why is crypto going up? The answer is nuanced. Macro tailwinds, dip-buying, reduced liquidations, and seasonal rotation patterns are all contributors. However, technical patterns, below-average volumes, and historical selling pressure from sophisticated players suggest this recovery phase could face meaningful headwinds.

For investors, the environment requires balanced positioning: taking modest profits on recoveries, maintaining strict risk management, and avoiding the temptation to over-leverage during what may ultimately prove a temporary rebound. The next 3-6 weeks will likely determine whether this recovery gains genuine traction or reverts to the downtrend that has dominated the latter half of 2025.