Bitcoin quickly rebounded from around $75,000 last week, breaking above $87,000 at one point, reaching a new high in about eight months. As of September 22, BTC returned to around $85,000, with a cumulative increase of over 13% in four days.

My judgment is that this round of market activity has exceeded a normal technical rebound. After the Fed's interest rate hikes and other negative factors have been accounted for, market risk appetite has started to recover, ETF funds and corporate buying have re-entered, and concentrated short covering has further amplified the speed of the rise.

The short-term structure of BTC has strengthened, but the support for spot prices above $85,000 still needs to be validated. The market is now in a confirmation phase after the breakout; the next thing to watch is not whether the price can achieve another rapid increase, but whether the funds can maintain the space created by the breakout.

Why did the interest rate hike not continue to suppress BTC?

On September 16, the Federal Reserve raised the target range for the federal funds rate by 25 basis points to 3.75% to 4% and stated that current inflation levels remain high. The Fed's statement

For the liquidity-dependent crypto market, interest rate hikes typically mean rising funding costs and pressure on risk appetite. After the policy announcement, BTC did briefly drop to around $75,000, but the market did not form a sustained sell-off, quickly recovering to $80,000.

This indicates that the pressure brought by the interest rate hike has been largely released during the declines before and after the decision. After the policy was implemented, the market did not see stronger tightening signals, and funds originally betting on continued declines began to retreat. Meanwhile, oil prices and U.S. Treasury yields fell, and risk assets such as U.S. stocks rebounded in unison, providing external conditions for BTC's recovery.

Therefore, the first layer of logic for this rise is that negative sentiment has been exhausted. The market's response to the interest rate hike has shifted from worry about the policy itself to reassessing whether asset prices have fallen excessively.

Spot funds provide the foundation, while short squeezing accelerates

Simply explaining this round of rise as short covering is insufficient.

Concentrated short covering can cause prices to break through quickly in a short time, but it is difficult to support a continuous rebound over several days on its own. Before and after this round of market activity, Bitcoin ETF funds have returned to net inflows, and corporate buying of BTC has resumed. Last Friday, the U.S. spot Bitcoin ETF recorded a net inflow of approximately $433 million, providing a real funding foundation for price recovery.

What truly accelerated the market was the short covering after BTC broke through the $82,000 to $84,000 range. As prices continued to cross stop-loss areas, shorts were forced to close their positions, creating new passive buying. Market data shows that during BTC's push to $85,000, the scale of short covering in the crypto market exceeded $700 million.

A more accurate definition is: the exhaustion of negative sentiment brings about emotional recovery, spot funds form the basis for the rise, and short covering amplifies the speed of the breakout.

This is also why I believe this round of market activity is not just a short squeeze. An increase driven purely by short covering typically loses momentum quickly after the short positions are released, while BTC currently remains around $85,000, indicating ongoing capital support at these high levels.

Altcoins are still in the follow-up rebound stage

During the rise of BTC, ETH, SOL, and some high liquidity altcoins rebounded in sync, but it cannot yet be defined as a comprehensive altcoin market.

Funds are first concentrating on BTC, indicating that market risk appetite is recovering, but it has not yet entered a phase of indiscriminate diffusion. The rise of some tokens comes more from the overall market's warming and short covering, and further confirmation of fundamentals and continuous capital inflows is still needed.

To shift from a follow-up rebound to sustained growth in the altcoin market, three conditions need to occur simultaneously: BTC must remain stable at high levels, ETH must show relative strength to BTC, and the total market trading volume must continue to expand.

Among these, the stability of BTC is the most important. When BTC continues to rise rapidly, liquidity typically remains concentrated in mainstream assets; when BTC suddenly declines from high levels, altcoins often bear greater volatility. Only when BTC enters a stable range can funds have more time to spread to other sectors.

The current market can be defined as a risk appetite recovery driven by mainstream coins, with one step remaining for it to fully diffuse.

What to observe next in this round of rebound?

The next market judgment can focus on three signals.

First, can BTC hold the $84,000 to $85,000 area? This is a direct basis for judging the validity of the breakout.

Second, when the price tests $87,000 again, can spot trading volume amplify in sync? Continuous inflow of spot funds indicates that the upward momentum comes from real demand; if futures positions increase rapidly while spot trading volume weakens, it suggests that leverage is being rebuilt.

Third, can ETH show relative strength? After BTC stabilizes, if ETH rises first, it usually indicates that risk appetite is beginning to spread to broader crypto assets. If ETH continues to underperform BTC, it indicates that funds are still primarily defensive.

In summary, this round of rise has threefold driving forces: the exhaustion of negative sentiment, fund inflow, and short covering. The short-term structure of BTC has strengthened, and the quality of support above $85,000 will determine whether the market remains in a rapid recovery phase or further develops into a new trend.

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Cryptocurrency asset prices are highly volatile, and this article only provides market information and analysis framework, not constituting any investment advice.

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