Market sentiment reverses after cryptocurrency short squeeze, Fed investigation presents new opportunities for Bitcoin

metaverse_hermit · 2026-01-26T05:05:54+00:00

Following last week's market crash, a major short squeeze occurred in the cryptocurrency market, reversing investor sentiment from fear to greed. Analysts highlight that uncertainties surrounding Fed Chair Jerome Powell and geopolitical risks are providing new value to Bitcoin, suggesting its growing recognition as an asset class amid global financial uncertainty.

metaverse_hermit

2026-01-26 05:05:54

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After the massive drop last week, the cryptocurrency market experienced a huge short squeeze event. Investors’ extreme fear rapidly turned into greed, completely reversing market sentiment, which suggests a structural change beyond a simple technical rebound. Notably, the possibility of a criminal investigation into Federal Reserve Chair Jerome Powell and geopolitical uncertainties are giving Bitcoin new value.

1011 Massive Short Squeeze and 180-Degree Turn in Investor Sentiment

Nicolai Sondergaard, an analyst at the crypto data platform Nansen, explained that this short squeeze is not just a technical rally but a fundamental turning point in market psychology. Investors who were in extreme fear after last week’s sharp decline are now seizing opportunities and entering a greed cycle. This rapid psychological shift is leading to changes in big tech and strategic asset allocation.

Questions about Fed Independence, Geopolitical Risks, and Structural Upside Factors for Bitcoin

According to analyst Sondergaard, institutional uncertainties related to the investigation of the Fed Chair and increasing geopolitical concerns are acting as structural tailwinds for Bitcoin. Traditionally, precious metals were the main beneficiaries in such risk scenarios, but now Bitcoin is increasingly being included in discussions of ‘alternative reserve assets.’ The investigation into Powell raises questions about monetary policy independence, which could soon add a ‘risk premium’ to Bitcoin, analysts say.

Price Fluctuations Since the Beginning of the Year: Bitcoin vs. Dollar Index

Currently, Bitcoin is trading at $87,770, reflecting market uncertainty through its price volatility since the start of the year. Comparing this to the movement of the US dollar index (DXY) over the same period, it shows that Bitcoin is gaining recognition as an independent asset class, less influenced by traditional markets. This suggests that as Fed policy uncertainty increases, Bitcoin’s relative value could rise.

The market changes following this short squeeze demonstrate that Bitcoin is being recognized as a new asset class amid global financial system uncertainties, beyond just a technical rebound. If investigations into the Fed and geopolitical tensions continue, Bitcoin’s risk premium is likely to expand further.

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