Market Wrap: Bitcoin and Stocks Rise, Signaling Greater Investor Appetite for Risk

Bitcoin and other cryptocurrencies advanced on Wednesday, reversing an earlier pullback. Stocks were also higher, partly due to the decline in Treasury bond yields.

BTC spot trading volume is starting to tick higher, albeit below January highs, according to CoinDesk data. Some analysts prefer to see a sustained rise in trading volume to confirm the recent bounce in crypto prices.

"Prior cycle majors (ETC, XRP, LTC and EOS) and meme coins (DOGE, SHIB) have been significant gainers in the last 24 hours, potentially signaling the market's risk-on appetite," FundStrat, a global advisory firm, wrote in a Wednesday briefing.

Still, futures market data continues to suggest a neutral/bearish bias among traders. That means "markets could remain indecisive about the next momentum-driven move, at least for the short term," FundStrat wrote.

Technical indicators have improved over the past few days, suggesting a strong buying zone between $40,000 and $46,000. Over the long term, however, buying activity could wane until momentum signals turn positive.

In other news, BlackRock, the world’s largest asset manager, is preparing to offer a cryptocurrency trading service to its investor clients, sources say. Clients could include public pension funds, endowments and sovereign wealth funds that currently trade traditional assets through BlackRock's integrated investment management platform.

BlackRock's potential crypto plans could signal rising demand for digital asset trading among large investors.

But regulatory issues remain, which could stall the pace of institutional crypto adoption. On Tuesday, Commodity Futures Trading Commission (CFTC) Chair Rostin Behnam asked the U.S. Congress to provide his agency with an additional $100 million so it can properly oversee crypto markets.

The chart below shows a gradual decrease in the total volume of buy orders filled by takers in BTC perpetual swaps, a type of derivative product in the crypto market, similar to traditional futures.

High values in buy volume indicate short-term buying pressure and high investor attention, according to CryptoQuant, a crypto data firm. Buying volume ticked lower over the past 24 hours and has not kept up with the recent bounce in BTC's spot price, which could indicate caution among derivative traders.

Still, other indicators such as open interest and buy volume versus sell volume have improved over the past week, which typically signals bullish sentiment in the crypto market.

"Limited liquidity may have contributed to the rising bitcoin price as outsized buying orders in thin order books tend to push up prices," Arcane Research wrote in a report this week. Therefore, even if trading volumes rise, there needs to be enough buying power to sustain BTC's price recovery.

Digital assets in the CoinDesk 20 ended the day higher.

There were no losers in the CoinDesk 20 on Wednesday.

Sector classifications are provided via the Digital Asset Classification Standard (DACS), developed by CoinDesk Indices to provide a reliable, comprehensive, and standardized classification system for digital assets. The CoinDesk 20 is a ranking of the largest digital assets by volume on trusted exchanges.