Leading cryptocurrencies bounced back Monday after experiencing their worst crash since the Covid era.

What Happened: Bitcoin clawed back to the $55,000 region during early trading and made further advances during overnight hours. This comes a day after the world's largest cryptocurrency's gravity-defying trajectory caused it to dip briefly below $50,000. BTC was still down 15% over the week as of this writing.

Ethereum made a more spirited comeback, reclaiming $2,500 after hitting an intraday low of $2,162.

Total cryptocurrency liquidations to $678 million in the last 24 hours owing to the recovery. More than $412 million in bullish bets was wiped out of the market.

Bitcoin's Open Interest dropped 2.45% in the last 24 hours. A drop in OI, coming alongside a rise in price, indicated that short sellers were covering their positions.

The Cryptocurrency Fear & Greed Index flashed "Extreme Fear" as of this writing, implying a potential market bottom was around the corner.

Top Gainers (24-Hours)

The global cryptocurrency market stood at $1.98 trillion, declining 1.48% in the last 24 hours.

Stocks plummeted Monday, with blue-chip indices posting their worst performances in nearly two years. The Dow Jones Industrial Average crashed 1,033.99 points, or 2.60%%, to close at 38,703.27. The S&P 500 tumbled 3% to end at 5,186.33. The tech-focused Nasdaq Composite sank 3.43% to finish at 16,200.08.

That said, stock futures bounced during overnight trading. Futures linked to the S&P 500 rose 1.27%, while the Nasdaq 100 Futures gained 1.65% as of 9:30 p.m.

Japan's stock market also rebounded after recording its worst trading day since the "Black Monday" crash of 1987. The blue-chip Nikkei 225 surged more than 8%.

Fears of recession and escalating tensions in the Middle East continued to keep investors on tenterhooks.

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Analyst Notes: Widely-followed cryptocurrency analyst and trader Ali Martinez noted the significance of $54,000 as a key support level for Bitcoin.

"If the $54,000 support holds, the key resistance on the upside for BTC is $67,000," the on-chain sleuth remarked

Based on the #Bitcoin MVRV Pricing Bands, $BTC needs to reclaim $54,000 as support to prevent a drop to $40,000. If the $54,000 support holds, the key resistance on the upside for #BTC is $67,000! pic.twitter.com/O6MYJHXNID

— Ali (@ali_charts) August 5, 2024

Another noted cryptocurrency researcher, Michaël van de Poppe, stated that today's correction could result in a bear trap for short position traders.

For the curious, a bear trap is a reversal from a down-trending market that may force traders to abandon their short positions in the face of rising losses.

This correction today can ultimately lead to the bear trap of this cycle.
Massive capitulation – causing $1.2 billion people to be wiped out of the markets through leveraged positions.
Big, big event for #Bitcoin & #Crypto.
Good recovery over the day, a lot of work to do.

— Michaël van de Poppe (@CryptoMichNL) August 5, 2024